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

Abstract

We analyse 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 during 2009-2013, 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 significant implications for patients’ health outcomes, with a close to 20 percent reduction in the probability of an emergency hospital admission shortly after a GP consultation.