Abstract

This paper presents a theoretical framework to describe the physicians' behavior under the fee-for-service scheme in Japan by explicitly incorporating the behavioral difference between self-employed and hospital-employed physicians into the model. One crucial assumption is found in the difference in the employment structure related to their income. The results show that self-employed physicians always provide unnecessary non-labor medical treatments, while hospital-employed physicians always give their patients the ideal level of the non-labor medical input. This study also presents that a substantial decline in the number of hospital-employed physicians results in an increase in physicians' overwork or unpaid work as well as in a decrease in the health level of the patients. This result could also be interpreted as a possible consequence of the reform of the Japanese trainee programme of physicians in 2004. We furthermore find that as long as the number of patients treated by both types of physicians is identical, hospital-employed physicians attain lower utility with heavier workloads but give better medical services with the higher health level of patients than self-employed physicians do.