TY  - JOUR
AU  - Gaynor,Martin
AU  - Rebitzer,James B.
AU  - Taylor,Lowell J.
TI  - Incentives in HMOs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8522
PY  - 2001
Y2  - October 2001
UR  - http://www.nber.org/papers/w8522
L1  - http://www.nber.org/papers/w8522.pdf
N1  - Author contact info:
Martin Gaynor
Heinz College
Carnegie Mellon University
4800 Forbes Avenue,,Room 3008
Pittsburgh, PA 15213-3890
Tel: 412/268-7933
Fax: 412/268-5338
E-Mail: mgaynor@cmu.edu

James B. Rebitzer
Professor of Management, Economics, Public Policy
Markets, Public Policy and Law Department
Boston University School of Management
595 Commonwealth Ave.
Boston, MA 02215
Tel: 617-383-7356
Fax: NA
E-Mail: rebitzer@bu.edu

Lowell Taylor
The Heinz School
Carnegie Mellon University
5000 Forbes Avenue
Pittsburgh, PA  15213-3890
E-Mail: lt20@andrew.cmu.edu
AB  - We study the effect of physician incentives in an HMO network. Physician incentives are controversial because they may induce doctors to make treatment decisions that differ from those they would chose in the absence of incentives. We set out a theoretical framework for assessing the degree to which incentive contracts do in fact induce physicians to deviate from a standard guided only by patient interests and professional medical judgement. Our empirical evaluation of the model relies on details of the HMO's incentive contracts and access to the firm's internal expenditure records. We estimate that the HMO's incentive contract provides a typical physician an increase, at the margin, of $0.10 in income for each $1.00 reduction in medical utilization expenditures. The average response is a 5 percent reduction in medical expenditures. We also find suggestive evidence that financial incentives linked to commonly used quality measures may stimulate an improvement in measured quality.
ER  -