TY  - JOUR
AU  - Leonard,Kenneth
AU  - Zivin,Joshua Graff
TI  - Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9797
PY  - 2003
Y2  - June 2003
UR  - http://www.nber.org/papers/w9797
L1  - http://www.nber.org/papers/w9797.pdf
N1  - Author contact info:
Kenneth Leonard
Department of Agriculture and Resource Economics
2200 Symons Hall
University of Maryland
College Park, MD 20742
Tel: (301) 405 8589
E-Mail: kleonard@arec.umd.edu

Joshua S. Graff Zivin
University of California, San Diego
9500 Gilman Drive, MC 0519
La Jolla, CA 92093-0519
Tel: 858/822-6438
E-Mail: jgraffzivin@ucsd.edu
AB  - We compare the more common physician compensation method of fee-for-service to the less common payment-for-outcomes method. This paper combines an investigation of the theoretical properties of both of these payment regimes with a unique data set from rural Cameroon in which patients can choose between outcome and service based payments. We show that consideration of the role of patient effort in the production of health leads to important differences in the performance of these contracts. Theory and empirical evidence show that when illnesses require (or are responsive to) large amounts of both patient and practitioner effort, outcome based payment schemes are superior to effort based schemes. The traditional healer -- a practitioner who offers health services on an outcome-contingent basis -- is advanced as an important example of how patient effort can be better understood and tapped in health care.
ER  -