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

Abstract

We analyse the effects of two different types of physician remuneration - fee-for-service and fixed salary on the treatment decisions of general practitioners (GPs) and on patients´ health outcomes. Using rich Norwegian register data during the period 2009-2013,we focus on GP locums working in a succession of temporary positions, which allows us to observe the same GPs working under different remuneration schemes within a relatively short period of time. 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 has also signiffcant implications for patients´health outcomes. The probability of experiencing an emergency admission to hospital shortly after a GP consultation is close to 20 percent lower if the GP is paid by fee-for-service instead of fixed salary. Overall, our analysis suggests that fixed-salary remuneration leads to underprovision of primary care.