òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Raising the Stakes: Physician Facility Investments and Provider Agency
òòò½Íø Review
(pp. 502–34)
Abstract
Principal-agent problems often extend beyond what can be directly addressed through conventional incentive arrangements. We examine a context where physicians are likely under-incentivized to minimize total medical costs until their private financial interests align with those of patients. Leveraging novel data on physician ownership of ambulatory surgery centers—that is, same-day facilities—we show that these equity holdings cause a substitution away from higher cost, rival settings that lowers Medicare spending by 10–40 percent per physician. We find no clear evidence of perverse behavior following these investments. Instead, our findings demonstrate how entrepreneurial activity can indirectly limit principal-agent problems and improve efficiency.Citation
Munnich, Elizabeth L., Michael R. Richards, Christopher M. Whaley, and Xiaoxi Zhao. 2026. "Raising the Stakes: Physician Facility Investments and Provider Agency." òòò½Íø Review 116 (2): 502–34. DOI: 10.1257/aer.20211324Additional Materials
JEL Classification
- D82 Asymmetric and Private Information; Mechanism Design
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- I11 Analysis of Health Care Markets
- I18 Health: Government Policy; Regulation; Public Health
- L84 Personal, Professional, and Business Services