Question

The agency relationship between physicians and patients is due to

a. uncertainty about need for care

b. Uncertainty about treatment quality and outcome

c. Licensure rules

d. Educational backgrounds of physicians

e. Nonprofit status of hospitals

Answer 1

Option B.

• The agency relationship between phyysician and patients is due to uncertainty about treatment quality and outcome.
• In the health care markets, there is a strong principal agent relationship between the physicians who provide the medical care and the patient's.
• When there is High uncertainty about the treatment quality and outcome, the provider's try to maximize their profits against the interests of patients.
• This leads to greater information asymmetry between the physicians and the patient's and this problem is termed as the principal Agent problem in health care.