Physician payment: incentives change with supply

Fee-for-service payment provides incentives for physicians to work hard and efficiently when there are too few physicians, but when there are too many physicians with too little work it encourages the generation of unnecessary work. Capitation-based payment encourages patient satisfaction as long as the physicians are competing for patients; however, as happened in Britain, once there are too few physicians, all with full lists, this payment system encourages physicians to reduce work to a minimum.