Incentives for dentists in public service: evidence from a natural experiment

How can independent physician contractors be motivated to contribute to public service health care? We consider evidence, derived from a natural experiment in the UK publicly funded dental care system, concerning the efficacy of using a contractual mechanism that provides explicit rewards for increased service provision against the alternative of offering an employment-like relationship. We find that dentists who were moved from quasi-employment to an activity-based incentive contract increased their activity in the publicly funded service by 26%. We also find and quantify evidence of considerable variation between suppliers, which suggests that factors such as an individual's intrinsic motivation, professional standards, and preferences are important moderators of financial incentives.