The Economics of Physician Incentives in Managed Care Organizations

Since Coase’s (1937) landmark paper on the theory of the firm, the economics profession has devoted increasing attention to the internal workings of organizations. An important strand of this literature is the empirical study of incentive systems. ¹ Using the internal records of firms and survey data, economists have documented how incentive systems shape individual careers and organizational performance. The spotty availability of data and the difficulty of identifying distinct changes in incentive regimes and outcomes have forced organizational economists into the unusual position of conducting narrowly focused case studies of specific types of firms and employment relationships (Helper 2002). Recent studies in this literature have examined incentives among groups of employees including windshield installers (Lazear 2000), steel workers (Ichniowski, Shaw, and Prennushi 1997), call center employees (Nagan et al. 2002), and attorneys at large law firms (Landers, Rebitzer, and Taylor 1996; and Rebitzer and Taylor 2004).