Revisiting Incentive-Based Contracts.
Revisiting Incentive-Based Contracts.
Yale J Health Policy Law Ethics. Winter 2017;17(1):1-59
Authors: Netter Epstein W
Abstract
Incentive-based pay is rational, intuitive, and popular. Agency theory tells us
that a principal seeking to align its incentives with an agent's should be able to
simply pay the agent to achieve the principal's desired results. Indeed, this
strategy has long been used across diverse industries-from executive
compensation to education, professional sports to public service-but with mixed
results. Now a new convert to incentive compensation has appeared on the scene:
the United States' behemoth health-care industry. In many ways, the incentive
mismatch story is the same. Insurance companies and employers are concerned
about constraining the cost of care, and patients are concerned about quality of
care. Physicians lack an adequate financial incentive to pay attention to either.
Health care's recent move away from the traditional fee-for-service
compensation model to incentive pay is perhaps unsurprising.
But there is a problem: mixed preliminary evidence and potential mal-effects
on vulnerable third-party patients. This Article employs a new lens-the legal
and behavioral literature on optimal contract specificity-to suggest why
incentive pay is problematic and why the health-care experience will be no
different than other industries. The use of incentive pay is a change in contractdrafting
strategy, a decisio...
Source: Yale journal of health policy, law, and ethics - Category: Medical Law Tags: Yale J Health Policy Law Ethics Source Type: research
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