We provide an analysis of the effect of physician payment methods on their hospital patients'
length of stay and risk of readmission. To do so, we exploit a major reform implemented in
Quebec (Canada) in 1999. The Quebec Government introduced an optional mixed
compensation (MC) scheme for specialist physicians working in hospital. This scheme
combines a fixed per diem with a reduced fee for services provided, as an alternative to the
traditional fee-for-service system. We develop a model of a physician's decision to choose …