Volume 8, Number 1 (Winter) 1973
Newhouse, Joseph P. 1973. "The Economics of Group Practice." Journal of Human Resources 8(1):37-56.
This article presents a theoretical and empirical discussion of how costs of outpatient medical practice vary with the size of the group providing services. It focuses upon the incentives of the individual physician to keep the costs of the practice down and his work effort high. Since cost and revenue-sharing schemes tend to dilute this incentive, we would expect that costs would be greater and hours of work less where they are present. The evidence presented in the article tends to support these propositions.
The author is in the Economics Department of The Rand Corporation, Santa Monica, Calif. More than the usual acknowledgment is due Vincent Taylor. The research reported in this article was conducted jointly, and many of the ideas reflect his thinking. The author would also like to thank Jan Acton and Frank Sloan for helpful comments and Ken Maurer for research assistance. Any views expressed in this paper are those of the author. They should not be interpreted as reflecting the view of The Rand Corporation or the official opinion or policy of any of its governmental or private research sponsors.
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