How does the type of remuneration affect physician behaviour? Fixed salary versus fee-for-service

Abstract

We analyze the effects of fee-for-service versus fixed salary on the treatment decisions of general practitioners (GPs) and on patients’ health outcomes. Using rich Norwegian register data for the period 2009–13, we find that GPs respond strongly and consistently to changes in remuneration type. Compared with fixed salary, GP payment by fee-for-service leads to an increase in the supply of consultations and a higher provision of medical services (along several dimensions) per consultation. This also has significant implications for patients’ health outcomes, with a more than 16 percent reduction in the probability of an emergency hospital admission (more than 46 percent reduction for ambulatory care–sensitive conditions) shortly after a GP consultation.