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

• Main Authors: Frandsen, B. (Author), Powell, M. (Author), Rebitzer, J.B (Author)
• Format: Article
• Language: English
• Published: Wiley-Blackwell Publishing, Inc. 2019
• Online Access: View Fulltext in Publisher

 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. © 2019, The RAND Corporation.