The optimal managerial compensation contract is characterized in an environment in which the manager influences the distribution of earnings through an unobservable effort decision. Actual earnings, when realized, are private information observed only by the manager, who may engage in the costly manipulation of earnings reports. We derive the optimal contract that guarantees the manager non-neg...

CONTEXT Medicare's Incentive Payment (MIP) program provides a 10% bonus payment to providers who treat Medicare patients in rural and urban areas where there is a shortage of generalist physicians. PURPOSE To examine the experience of Alaska, Idaho, North Carolina, South Carolina, and Washington with the MIP program. We determined the program's utilization and which types of physicians receiv...

Payment to Medicare Advantage (MA) plans was fundamentally altered in the Patient Protection and Affordable Care Act of 2010 (ACA). MA plans now operate under a new formula for county-level payment area benchmarks, and in 2012 began receiving quality-based bonus payments. The Medicare Advantage Quality Bonus Payment Demonstration expanded the bonus payments to most MA plans through 2014; howeve...

In this paper we report on a principal-agent experiment where the principal can choose whether to rely on an unenforcable bonus contract or to combine the bonus contract with a fine if the agent’s effort falls below a minimum standard. We show that most principals do not use the fine and that the pure bonus contract is more efficient than the combined contract. Our experiment suggests that prin...

Bonus Payments and Reference Point Violations We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one’s relative standing towards the referen...