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Monitoring institutions in healthcare markets: Experimental evidence

Author

Listed:
  • Silvia Angerer
  • Daniela Glätzle‐Rützler
  • Christian Waibel
Abstract
This paper investigates the impact of monitoring institutions on market outcomes in health care. Healthcare markets are characterized by asymmetric information. Physicians have an information advantage over patients with respect to appropriate treatments, which they may exploit through over‐ or under‐provision or by overcharging. We introduce two types of costly monitoring: endogenous and exogenous monitoring. When monitoring detects misbehavior, physicians have to pay a fine. Endogenous monitoring can be requested by patients, while exogenous monitoring is performed randomly by a third party. We present a toy model that enables us to derive hypotheses and test them in a laboratory experiment. Our results show that introducing endogenous monitoring reduces the level of undertreatment and overcharging. Even under high monitoring costs, the threat of patient monitoring is sufficient to discipline physicians. Exogenous monitoring also reduces undertreatment and overcharging when performed sufficiently frequently. Market efficiency increases when endogenous monitoring is introduced and when exogenous monitoring is implemented with sufficient frequency. Our results suggest that monitoring may be a feasible instrument to improve outcomes in healthcare markets.

Suggested Citation

  • Silvia Angerer & Daniela Glätzle‐Rützler & Christian Waibel, 2021. "Monitoring institutions in healthcare markets: Experimental evidence," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 951-971, May.
    • Handle: RePEc:wly:hlthec:v:30:y:2021:i:5:p:951-971
    DOI: 10.1002/hec.4232
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    Cited by:

    1. Jeannette Brosig‐Koch & Burkhard Hehenkamp & Johanna Kokot, 2023. "Who benefits from quality competition in health care? A theory and a laboratory experiment on the relevance of patient characteristics," Health Economics, John Wiley & Sons, Ltd., vol. 32(8), pages 1785-1817, August.
    2. Massimo Finocchiaro Castro & Calogero Guccio & Domenica Romeo, 2024. "Looking inside the lab: a systematic literature review of economic experiments in health service provision," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 25(7), pages 1177-1204, September.
    3. Finocchiaro Castro, Massimo & Guccio, Calogero & Romeo, Domenica, 2022. "A systematic literature review of 10 years of behavioral research on health services," EconStor Preprints 266248, ZBW - Leibniz Information Centre for Economics.
    4. Brosig-Koch, Jeannette & Groß, Mona & Hennig-Schmidt, Heike & Kairies-Schwarz, Nadja & Wiesen, Daniel, 2021. "Physicians' incentives, patients' characteristics, and quality of care: A systematic experimental comparison of fee-for-service, capitation, and pay for performance," Ruhr Economic Papers 923, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Waibel, Christian & Wiesen, Daniel, 2021. "An experiment on referrals in health care," European Economic Review, Elsevier, vol. 131(C).
    6. Mona Groß & Hendrik Jürges & Daniel Wiesen, 2021. "The effects of audits and fines on upcoding in neonatology," Health Economics, John Wiley & Sons, Ltd., vol. 30(8), pages 1978-1986, August.
    7. Green, Ellen P. & Kloosterman, Andrew, 2022. "Agent sorting by incentive systems in mission firms: Implications for healthcare and other credence goods markets," Journal of Economic Behavior & Organization, Elsevier, vol. 200(C), pages 408-429.
    8. Angerer, Silvia & Glätzle-Rützler, Daniela & Waibel, Christian, 2023. "Framing and subject pool effects in healthcare credence goods," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 103(C).

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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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