Abstract
It is increasingly recognized that, by introducing healthcare information systems, it may be possible to improve healthcare delivery. Yet, insufficient attention has been paid, in the context of the introduction and implementation of new technologies, to examine the issues concerning the reduction of the astonishing variations in medical (and surgical) practices across seemingly similar areas. This article studies the causes of the differences in healthcare practices by examining the agency relationship where the patients delegate decision making to the physicians. To do this, it first presents the consequences of two main informational issues: the asymmetric information, and the imperfect information. Under such informational inadequacies, practitioners could not act in the best interests of their patients, and unnecessary and inappropriate cares could appear. Second, this article derives from such informational problems the necessity of information and coordination systems to ensure a better healthcare delivery.
Key Terms in this Chapter
Private Information: Relevant information known only by some parties involved in a contractual relationship.
Asymmetric Information: This term refers to situations in which contractual parties have differing amount of relevant information. Such situations can be adverse selection situation or moral hazard situation.
Moral Hazard: In economic theory, moral hazard refers to the postcontractual opportunism that results from an asymmetric information. It occurs when the actions contractually required are not freely observable; for example, a party takes an inappropriate action or decision that can affect the outcomes of the contract.
Agency Relationship: Situation in which one party relies on another party to make decisions.
Imperfect Information: This term refers to situations in which a contractual party ignores relevant information about the other party or the environment, or when he/she does not know the action of the other party.
Small Area Variations: The wide variations in the per capita rates of healthcare procedures across seemingly similar areas.
Adverse Selection (or Antiselection): In economic theory, adverse selection refers to the precontractual opportunism that results from an asymmetric information. It occurs when one party has private information—about his/her own characteristics or on the environment—that can affect the outcomes of the contract.