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Dan Friesner and Chris Stevens
''Ownership and rent-seeking behavior in specialty health care practices''
( 2007, Vol. 9 No.10 )
Specialty health care practices are unique in that they exhibit a wide range of ownership types, from large corporations controlled by third parties to those directly owned by practitioners (physicians, therapists, etc.). Many of these practices also employ licensed assistants whose labor is partially substitutable with those of the practitioners. This paper presents a theoretical model that examines the impact that different levels of ownership have on rent-seeking behavior and efficiency within specialty practices. Our primary focus is on whether lower levels of ownership induce practitioners to extract larger economic rents by substituting their services for those of their assistants. We find that if the practitioners are not required to be technically efficient then they unambiguously respond to lower ownership with rent-seeking. However, requiring the firm to be technically (but not allocatively) efficient, may be sufficient to mitigate this incentive.
Keywords: efficiency
JEL: I1 - Health: General
Manuscript Received : Nov 27 2006 Manuscript Accepted : Jun 12 2007

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