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Contracts To Promote Optimal Use Of Optional Diagnostic Tests In Cancer Treatment, Salar Ghamat, Gregory S. Zaric, Hubert Pun

Business Publications

In this study, we examine performance-based payment contracts to promote the optimal use of an optional diagnostic test for newly diagnosed cancer patients. Our work is inspired by three trends: tremendous increases in the cost of new, advanced cancer drugs; development of new diagnostic tests to allow physicians to tailor treatment to patients; and changes in healthcare funding models that reward quality care. We model the interaction between two parties—a healthcare payer and an oncologist, in which the oncologist has private information about patients’ characteristics (adverse selection) and the payer does not know whether the oncologist takes the optimal course …