Monitoring institutions in healthcare markets: Experimental evidence. (15th February 2021)

• Record Type: Journal Article
• Authors: Angerer, Silvia; Glätzle‐Rützler, Daniela; Waibel, Christian
• Is Part Of: Health economics. Volume 30:Number 5(2021)
• Page Start: 951
• Page End: 971
• Publication Date: 2021-02-15
• Subjects: credence goods -- laboratory experiment -- monitoring -- overtreatment -- overcharging -- physician behavior -- undertreatment; Medical economics -- Periodicals; Economics, Medical -- Periodicals; Health Care Costs -- Periodicals; Health Policy -- economics -- Periodicals; Health Services -- economics -- Periodicals; 362.1
• DOI: 10.1002/hec.4232
• Languages: English
• ISSNs: 1057-9230

Abstract

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.