The effect of a performance incentive scheme on the allocation of time across multiple tasks: evidence from physicians. Peter Sivey, Anthony Scott, Stefanie Schurer Melbourne Institute of Applied Economic and Social Research The University of Melbourne Abstract Despite substantial evidence of the unintended consequences of performance incentives in the presence of multitasking and information asymmetries, their use for physicians is growing. The aim of this paper is to examine the effects of a pay for performance scheme for primary care physicians in Australia on their allocation of time between tasks in remunerated and unremunerated health problems. We examine whether physicians substitute tasks, increase costs, or become more efficient at undertaking tasks as a result of the incentive scheme. A unique dataset of almost 60,000 physician-patient consultations from almost 4,000 physicians is used. A cost function approach is used to estimate the marginal time-costs and marginal rates of substitution between tasks in consultations, whilst controlling for physician fixed effects and patient characteristics. Preliminary results show that the incentive scheme is associated with lower marginal costs per task for both remunerated and unremunerated health problems, suggesting that GPs produce consultations more efficiently under the incentive scheme. This may be due to both an increase in IT the accompanied the incentive scheme, and also reductions in informational asymmetries between doctors and patients through more frequent patient visits. Contact: a.scott@unimelb.edu.au JEL codes: J44, J33, M52, I12 Acknowledgements This study was funded by an Australian Research Council Discovery Grant (DP0771005). Thanks go to Helena Britt, Lisa Valenti, and Clare Bayram at the Family Medicine Research Centre at the University of Sydney for providing and assisting with the data. Thanks to participants The Australian Health Economics Society Conference in 2008, the International Health Economics Association in 2009, and the Centre for Applied Economic Research Health Economics Workshop, UNSW, 2010. 1