Multi-Principal Agency and the Compliance with Professional Guidelines in Health Systems: Economic and Regulatory Perspectives

Amid the trend of rising health expenditure in developed economies, changing the healthcare delivery models is an important point of action for service regulators to contain this trend. Such a change is mostly induced by either financial incentives or regulatory tools issued by the regulators and targeting service providers and patients. This creates a tripartite interaction between service regulators, professionals, and patients that manifests a multi-principal agent relationship, in which professionals are agents to two principals: regulators and patients. This thesis is concerned with such a multi-principal agent relationship in healthcare and attempts to investigate the determinants of the (non-)compliance to regulatory tools in light of this tripartite relationship. In addition, the thesis provides insights into the different institutional, economic, and regulatory settings, which govern the multi-principal agent relationship in healthcare in different countries. Furthermore, the thesis provides and empirically tests a conceptual framework of the possible determinants of (non-)compliance by physicians to regulatory tools issued by the regulator. The main findings of the thesis are first, in a multi-principal agent setting, the utilization of financial incentives to align the objectives of professionals and the regulator is important but not the only solution. This finding is based on the heterogeneity in the financial incentives provided to professionals in different health markets, which does not provide a one-size-fits-all model of financial incentives to influence clinical decisions. Second, soft law tools as clinical practice guidelines (CPGs) are important tools to mitigate the problems of the multi-principal agent setting in health markets as they reduce information asymmetries while preserving the autonomy of professionals. Third, CPGs are complex and heterogeneous and so are the determinants of (non-)compliance to them. Fourth, CPGs work but under conditions. Factors such as intra-professional competition between service providers or practitioners might lead to non-compliance to CPGs – if CPGs are likely to reduce the professional’s utility. Finally, different degrees of soft law mandate have different effects on providers’ compliance. Generally, the stronger the mandate, the stronger the compliance, however, even with a strong mandate, drivers such as intra-professional competition and co-management of patients by different professionals affected the (non-)compliance.