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Exit, Choice Or Loyalty: Patient Driven Competition In Primary Care

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  • Rosella LEVAGGI
  • Lise ROCHAIX
Abstract
ABSTRACT**: This paper analyses the potential costs and benefits from patient driven competition between GPs and specialists by comparing gate‐keeping with direct access to specialist care. The two access rules are compared under fee‐for‐service and capitation, on their performance at minimizing both total financial costs and patients’ opportunity cost of time in care. To analyse the social cost of patients’ potential access mistakes, two types of illnesses are considered, with two levels of severity and an equal probability for each of the four events. The results generated under information symmetry show that gate‐keeping always dominates in terms of minimizing financial cost. Results are extended to show that under patients’ heterogeneity with respect to time preferences, allocative efficiency can be enhanced in gate‐keeping by giving the patient the option to seek a specialist directly, provided he bears the extra cost. When turning to information asymmetry, results are reversed, and direct access is shown to be more cost effective. This is due to patients’ ability to constrain providers’ opportunistic behaviour by ‘voting with their feet’. Beyond increasing allocative efficiency, patient choice is therefore found, under certain conditions, to contribute towards enhancing productive efficiency. Finally, introducing co‐payments to share the financial risk associated with direct access potentially weakens patients’ ability to curb providers’ strategic behaviour. Under information asymmetry, direct access to specialist care should therefore remain free if patient's disutility in time in care is linear. When it is instead increasing, we show that a co‐payment becomes necessary to curb specialists’ information rent. Finally, under information asymmetry, the mixed solution (gate‐keeping with optional direct access) improves on pure gate‐keeping but is still suboptimal.

Suggested Citation

  • Rosella LEVAGGI & Lise ROCHAIX, 2007. "Exit, Choice Or Loyalty: Patient Driven Competition In Primary Care," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 78(4), pages 501-535, December.
    • Handle: RePEc:bla:annpce:v:78:y:2007:i:4:p:501-535
    DOI: 10.1111/j.1467-8292.2007.00345.x
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    References listed on IDEAS

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    1. Rosella Levaggi & Lise Rochaix, 2003. "Optimal payment schemes for physicians," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 2(2), pages 87-107, August.
    2. Gafni, Amiram & Charles, Cathy & Whelan, Tim, 1998. "The physician-patient encounter: The physician as a perfect agent for the patient versus the informed treatment decision-making model," Social Science & Medicine, Elsevier, vol. 47(3), pages 347-354, August.
    3. Kris De Jaegher & Marc Jegers, 2001. "The physician–patient relationship as a game of strategic information transmission," Health Economics, John Wiley & Sons, Ltd., vol. 10(7), pages 651-668, October.
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    6. Blomqvist, Ake & Leger, Pierre Thomas, 2005. "Information asymmetry, insurance, and the decision to hospitalize," Journal of Health Economics, Elsevier, vol. 24(4), pages 775-793, July.
    7. James M. Malcomson, 2004. "Health Service Gatekeepers," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 401-421, Summer.
    8. Gravelle, Hugh, 1999. "Capitation contracts: access and quality," Journal of Health Economics, Elsevier, vol. 18(3), pages 315-340, June.
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    Cited by:

    1. Rosella Levaggi & Moretto Michele, 2008. "Investment In Hospital Care Technology Under Different Purchasing Rules: A Real Option Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 60(2), pages 159-181, April.
    2. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2010. "Physicians self selection of a payment mechanism: Capitation versus fee-for-service," Working Papers 1024, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    3. Yiwei Chen & Hui Ding & Min Yu & Jieming Zhong & Ruying Hu & Xiangyu Chen & Chunmei Wang & Kaixu Xie & Karen Eggleston, 2019. "The Effects of Primary Care Chronic-Disease Management in Rural China," NBER Working Papers 26100, National Bureau of Economic Research, Inc.
    4. Allard, Marie & Jelovac, Izabela & Léger, Pierre Thomas, 2011. "Treatment and referral decisions under different physician payment mechanisms," Journal of Health Economics, Elsevier, vol. 30(5), pages 880-893.
    5. Rosella Levaggi, 2005. "Hospital Health Care: Pricing and Quality Control in a Spatial Model with Asymmetry of Information," International Journal of Health Economics and Management, Springer, vol. 5(4), pages 327-349, December.
    6. Marie Allard & Izabela Jelovac & Pierre-Thomas Léger, 2014. "Payment mechanism and GP self-selection: capitation versus fee for service," International Journal of Health Economics and Management, Springer, vol. 14(2), pages 143-160, June.
    7. Schuster, Stephan, 2012. "Applications in Agent-Based Computational Economics," MPRA Paper 47201, University Library of Munich, Germany.

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