Outcome Versus Service Based Payment in Health Care: Lessons from African Traditional Healers

We compare the more common physician compensation method of fee-for-service to the less common payment-for-outcomes method. This paper combines an investigation of the theoretical properties of both of these payment regimes with a unique data set from rural Cameroon in which patients can choose between outcome and service based payments. We show that consideration of the role of patient effort in the production of health leads to important differences in the performance of these contracts. Theory and empirical evidence show that when illnesses require (or are responsive to) large amounts of both patient and practitioner effort, outcome based payment schemes are superior to effort based schemes. The traditional healer -- a practitioner who offers health services on an outcome-contingent basis -- is advanced as an important example of how patient effort can be better understood and tapped in health care.

Using the Hawthorne Effect to Examine the Gap Between a Doctor's Best Possible Practice and Actual Performance

Many doctors in developing countries provide considerably lower levels of quality to their patients than they have been trained to provide. The gap between best practice and actual performance is difficult to measure for individual doctors who differ in levels of training and experience and who face very different types of patients. We exploit the Hawthorne effect—in which doctors change their behavior when a researcher comes to observe their practices—to measure the gap between best and actual performance. We analyze this gap for a sample of doctors, examining the impact of the organization for which doctors work on the performance of doctors, after controlling for their ability. We find that some organizations succeed in motivating doctors to work at levels of performance that are close to their best possible practice. This paper adds to recent evidence that motivation is at least as important to health care quality as training and knowledge.motivation, practice quality, health care, Tanzania, Hawthorne effect, Health Economics and Policy, Institutional and Behavioral Economics, International Development, I1, O1, O2,

The quality of medical advice in low-income countries

This paper provides an overview of recent work on quality measurement of medical care and its correlates in four low and middle-income countries-India, Indonesia, Tanzania, and Paraguay. The authors describe two methods-testing doctors and watching doctors-that are relatively easy to implement and yield important insights about the nature of medical care in these countries. The paper discusses the properties of these measures, their correlates, and how they may be used to evaluate policy changes. Finally, the authors outline an agenda for further research and measurement.Health Monitoring&Evaluation,Health Systems Development&Reform,Gender and Health,Health Economics&Finance,Disease Control&Prevention

African Traditional Healers and Outcome: Contingent Contracts in Health Care

Traditional healers are a source of health care for which Africans have always paid and even with the expansion of modern medicine healers are still popular. This paper advances the unique view that traditional healers neither possess supernatural power nor do they take advantage of their clients: they use important elements of their practice to credibly deliver unobservable medical effort and therefore high quality care. An important element of their practice has previously been ignored: traditional healers use outcome-contingent contracts to deliver unobservable medical effort. This paper presents empirical evidence that, as a result of these contracts, traditional healers are popular because they provide more unobservable medical effort than other providers from which patients can choose

Asymmetric Information and the Role of NGOs in African Health Care

In African health care the "miracle of the market "has not occurred. Patients exhibit willingness to pay for health care and yet practitioners are unable to sell their services. Simultaneously non-governmental organizations (NGOs) are running successful health facilities for which patients are willing to pay. We develop a model of the demand for health care in the presence of asymmetric information that allows us to view African health care in the framework of the New Institutional Economics literature. We use previously published empirical results to support the validity of this view and show that NGOs have the institutional capacity to deliver high quality health care, whereas private practitioners, even with good intentions, will not easily succeed. Having arrived at the well documented conclusion that NGOs provide high quality services through theory allows us to draw policy conclusions on ways to extend the provision of health services

Institutional Solutions to the Principal-Agent Problem in African Health Care

Free markets for health care in Africa do not function properly, in that patients exhibit willingness to pay for health care and yet practitioners are unable to sell their services. It is widely acknowledged that health markets everywhere are troubled with imperfect information. Therefore it is no surprise that free markets and spot contracts do not lead to an efficiently functioning market for health care. When issues of agency are not resolved we find practitioners specializing in the sale of pharmaceuticals but not using their skills as diagnosticians. Mechanisms that can reduce agency cost are beneficial to both patients and practitioners. This paper draws on theory and empirical evidence to examine what institutions are necessary to solve the problems of imperfect information in this context. We dismiss government regulation because the regulatory capacity does not exist in most African countries. Theory suggests that self-regulation by professional bodies should arise as privatization continues. Empirical evidence, however, suggests that this conclusion is overly-optimistic. On the other hand, referral networks perform much the same function but do not require centralized control. The most successful institution for the delivery of quality medical care in Africa is that of independent, pre-existing value-based organizations (missions) and we suggest their choice of institutional form has contributed to their success

"Active Patients" in Rural African Health Care: Implications for Welfare, Policy and Privatization

The 'active patient' is introduced in this paper. She is the same person as the rational peasant that we have known for at least three decades. She is a rational agent seeking health care in an environment characterized by market failures (particularly agency in the supply of medical quality) and imperfect institutional responses to these failures. We show evidence that patients significantly increase their welfare by choosing between various different providers and matching their illnesses to the resources that are available at these different providers. This paper suggests that continuing to view patients as passive participants in the health care market gives way to misleading policy suggestions and may in fact reduce the welfare of patients

African Traditional Healers: Incentives and Skill in Health Care Delivery

The benefit of health care comes not just from the ability of health care providers to produce health but from their motivation to do so as well. The fact that traditional healers in Africa are paid on the basis of health outcomes not services provided changes the incentives they face compared to those of modern health care providers. This paper documents these payment methods in Cameroun and explores the different incentives faced by practitioners in government and church-based facilities as well as traditional healers. To test whether such incentives make a difference in the provision of health care I use a multinomial logit analysis of an original data set from Cameroun on patients' choice of provider and show that patients choose practitioners as if they were aware of the difference in incentives. Thus, though patients cannot perfectly evaluate the quality of health they receive or would have received, they can evaluate expected quality by examining incentives