Department of Economics, University of California - San Diego, La Jolla, CA, USA.
This paper employs a nationally representative, household-based dataset in order to test how the compensation method of both the specialists and the primary care providers affects surgery rates. After controlling for adverse selection, I find that when specialists are paid through a fee-for-system scheme rather than on a capitation basis, surgery rates increase 78%. The impact of primary care physician compensation on surgery rates depends on whether or not referral restrictions are present. Copyright (c) 2009 John Wiley & Sons, Ltd.