New Publication: Informal Payments and Patients’ Perceptions of the Physician Agency Problem: Evidence from Rural China

Informal payment for medical services is a common phenomenon in China. Patients make informal payments, in cash or in kind, to physicians in addition to official charges billed for medical services. This paper assesses the associations between patients’ perceptions of the physician as an agent for the patient’s interests (physician agency problem) and informal payment behavior. Using data of 24,000 and 6700 rural households respectively from the Health Development of Rural China Program database (collected in 2008) and Ningxia data source (collected in 2015), we find that patients’ concern about physician agency problems is significantly associated with informal payments. We explain that patients may initiate informal payments to physicians in order to mitigate the physician agency problem, which suggests that improving alignment between doctors’ incentives and patients’ interests is essential to mitigating informal payments.