Supply-side incentives, medical effort and quality care in a lower-middle income setting

Too often, patients in low and middle income countries receive inadequate quality healthcare. Technical capacity constraints - insufficient availability of competent health professionals, medicines and other essential inputs - are often seen as the cause. Whilst undoubtedly important, these constraints cannot fully explain poorly delivered health services. This thesis explores how supply-side incentives also influence the quality of healthcare doctors deliver to patients. It uses the analytics of the principal-agent model as the starting point for illustrating the impact of different incentives on medical effort, and through this effort, the quality of healthcare. Insights and testable hypotheses emerging from this conceptual approach are then evaluated through empirical studies of doctors working in 30 districts in the Philippines, using a variety of econometric methods. Data came from both primary and secondary sources. A first study explored the relationship between empirical measures of medical effort and the technical quality of healthcare. A second study analysed how various financial and non-financial incentives affect the amount of medical effort exerted by doctors on public hospital inpatients. A third study addressed the phenomenon of physician ownership of private pharmacies, and whether this has any adverse impacts on patients. Results showed that whilst the relationship between medical effort and quality is not straightforward, low effort typically results in lower quality care. Subsequent results illustrated how supply-side incentives can lead to public hospital patients with equal health need being treated unequally; and pharmacy-owning physicians unduly influencing a patient's use and expenditure in pharmacies. Suggested policy reforms are based on reshaping the incentive structure within which doctors operate, including reform of provider payment mechanisms and patient charges; improved monitoring and regulation; and policies to encourage greater use of generic drugs.