Patient compliance, physician empathy and financial incentives within a principal-agent framework

Compliance with medication regimens among patients with chronic conditions in the U.S. and other developed countries averages only 50%. Numerous studies have attributed poor compliance to physicians' failure to exhibit sufficient empathy with patients' problems. Can financial incentives help modify physicians' empathic behavior? In view of contradicting evidence in the health psychology literature, the present paper addresses this question from a rational-choice perspective, introducing a principal-agent model of physician empathy and patient compliance. The model allows the physician to exhibit empathy with the patient, to which the patient responds by choosing his desired level of compliance, which the physician takes into account when determining the level of empathy she exhibits. The model is first applied to rationally substantiate the evidence that patient compliance rises with physician empathy, and subsequently to examining the relationship between physician empathy and the physician's fee. The analysis reveals that the physician will exhibit less empathy in response to a higher fee, implying that the higher the fee the less compliant her patient will be.