NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sticking Points: Common-Agency Problems and Contracting in the U.S. Healthcare System

Brigham Frandsen, Michael Powell, James B. Rebitzer

NBER Working Paper No. 23177
Issued in February 2017
NBER Program(s):Health Care

We propose a "common-agency" model for explaining inefficient contracting in the U.S. healthcare system. In our setting, common-agency problems arise when multiple payers seek to motivate a shared provider to invest in improved care coordination. Our approach differs from other common-agency models in that we analyze "sticking points," that is, equilibria in which payers coordinate around Pareto-dominated contracts that do not offer providers incentives to implement efficient investments. These sticking points offer a straightforward explanation for three long observed but hard to explain features of the U.S. healthcare system: the ubiquity of fee-for-service contracting arrangements outside of Medicare; problematic care coordination; and the historic reliance on small, single specialty practices rather than larger multi-specialty group practices to deliver care. The common-agency model also provides insights on the effects of policies, such as Accountable Care Organizations, that aim to promote more efficient forms of contracting between payers and providers.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23177

Users who downloaded this paper also downloaded* these:
Doyle, Graves, and Gruber w23166 Evaluating Measures of Hospital Quality
Friedrich and Hackmann w23174 The Returns to Nursing: Evidence from a Parental Leave Program
Neumark and Wascher w12663 Minimum Wages and Employment: A Review of Evidence from the New Minimum Wage Research
Chatterji and Cuellar w12437 How Do Youth with Mental Disorders Fare in the Juvenile Justice System?
Cawley and Frisvold w21465 The Incidence of Taxes on Sugar-Sweetened Beverages: The Case of Berkeley, California
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us