Some Ramifications of Compensation Limitations in Personal Services Contracts for Direct Health Care Providers

Abstract

The purpose of this study was to examine the effects of price restrictions in personal services contracts for direct health care providers. This is a unique method of contracting designed specifically to facilitate the hiring of highly specialized health care providers, primarily physicians, that typically demand a high rate of compensation than that generally offered by the services. Legislation that authorized increased use of such contracts for health care services simultaneously mandated wage ceilings. Some economic impacts of wage ceilings in labor markets are presented. Shortages and a loss of military surplus are likely to be associated with wage ceilings. Recent data concerning personal services contracts are presented and examined, the result of the data evaluation provides some surprises. First, many personal services contracts are not being utilized as originally intended. In fact very few are actually used for physicians' services. Second, there is an appearance of impropriety in some of these contracts.