Sticking points: common-agency problems and contracting in the US healthcare system

Brigham Frandsen, Michael Powell, James B. Rebitzer

Research output: Contribution to journalArticlepeer-review

3 Scopus citations

Abstract

We propose a “common-agency” model for explaining inefficient contracting in the US healthcare system. Common-agency problems arise when multiple payers seek to motivate a provider to invest in improved care coordination. We highlight the possibility of “sticking points,” that is, Pareto-dominated equilibria in which payers coordinate around contracts which give weak incentives to the provider. Sticking points rationalize three hard-to-explain features of the US healthcare system: widespread fee-for-service arrangements; problematic care coordination; and the historical reliance on single-specialty practices to deliver care. The model also analyzes the effects of policies promoting more efficient contracting between payers and providers.

Original languageEnglish (US)
Pages (from-to)251-285
Number of pages35
JournalRAND Journal of Economics
Volume50
Issue number2
DOIs
StatePublished - Jun 1 2019

ASJC Scopus subject areas

  • Economics and Econometrics

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