Physicians' altruism in incentives contracts: Medicare's quality race

Galina Besstremyannaya¹ (with Sergej Golovin²)

1 Centre for Economic and Financial Research, NES Moscow (CEFIR))

2 NES Moscow


The paper analyzes the impact of physicians' altruism and motivation on the outcomes of rank-order tournaments in healthcare, where a fixed price contract on quantity is supplemented with a relative performance contract on quality. Our theoretical model forecasts crowding out of most altruistic types owing to the effect of the participation constraint. In an empirical application to the Medicare's nationwide natural experiment with a relative performance contract on quality for acute inpatient care since 2013, we observe the proof of the model's predictions. Namely, the quality dimensions, which are linked to patient's benefit, demonstrate higher deterioration among top-performing hospitals than other incentivized dimensions. The unintended effects of altruism may be adjusted by the social planner through designing a revelation mechanism and subsidizing the altruistic types.


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