understand an organization is multidimensional and nonlinear, otherwise, ideologies, beliefs and ways of seeing the organization differ in several

aspects, as cultural, social, political, economical etc.

The Agency Theory: A conceptual approach, and a general review of empirical studies in Health Care Organizations.
Alexander Bermudez Rubashkyn. Medical University. School of Health Care Administration. Taipei

Introduction. Understanding the organization is not an easy task, however it is very important. The design of an organization is an important task for the one who decide to start a new business or establish order in one existent enterprise. The framework of reference can be sometimes difficult to understand, sometimes the leader of one organization instinctively follows the model most known by him (e.g. bureaucratic model), even though when the chosen model is already outdated, and the outcomes is predicted as undesirable in terms of optimization for our organization. Other situation can occur in understanding the evolution in the field of management and the models and theories that have been emerging in the last years are not easy to unify, so that it's why that to describe the evolution of how we understand the organization today can be complex and ambiguous, while changing the way we

As a part of the knowledge that we have been acquiring during the last century in terms of the different views of the organizations from Adam Smith, Taylor and Fayol - to nowadays, it is clear that the focuses upon how the organization have differed from each perspective, from each field of economy, politic, sociology; After 50 years, the theories or model or organization have indicated several ways to approach or outlook the way how we understand the organization it self. In this review it is going to address in a general approach of the agency theory, focusing specially in the agency theory, the principal - agent problem appointed sometimes as the most important element of "the principal-agent theory". This review as well is intended to give a general boarding of several empirical studies allowing the understanding to this theory either with intention to show how the theory works in the relationship within health care organizations, giving some evidence to see this overview of the relation among the principal (manager) and the agent (employee). The following review have a topbottoms structure, from International Health Organizations, National Health Agencies, Insurance Agencies, until Hospitals, Health Professionals and its Patients.

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

Development of the Agency Theory. In this theory according with the descriptions of the authors (Rummell, Schendel, Teece 1991) [1] is seen a complete rupture of the organization theory, due that its object of study are the private organizations. This has given to some author to describe this theory as a theory of the enterprise, within the theory of organization. The Agency Theory has intended to study the different ways that we have to establish a formal contract between the agent, in this case the employee or worker, and the principal, in this case the manager or employer. Thus as we have seen, it merges a relation of "Agency" every time that an individual depends of the action of the other, in short, the objective of this theory is to determine, whether given certain hypothesis related to the persons, the organization and the information, which is the most efficient contract to govern the relation principalagent, taking into account the behavior of the agent. The contract: In our society the division of the work and the interchange as a regular part of our life are made through the contracts, a contract is a common agreement that can be written or oral. The interchanges are possible because there will be always different subjective valorations about a good or service, in economy an important element is called the consumer's exceeding expectation, this phenomena happen when the person who buy or pay for a good or a service give a subjective

additional value, being opposite this appreciation in the case of the seller or service provider, on this way both parties can be beneficiaries of the interchange, as we know both of them want to be beneficiaries; however the situation can be different when the product or service don not fulfilled for the payer. The establishment of control it is an important element if we want to be sure if the contract is being kept during the transaction, is not difficult to control a transaction of actives for goods, since we know the specifications of what we are buying, furthermore we have experience and previous knowledge, however in the case of services, the control is not easy because usually we don't have enough information about what it is going to happen in the future. The agency problem happens when: 1. The information of the agent actions is hidden or is selected, 2. The actions of the agent are hidden or there is moral risk, with the desire of make not observable the profit of each party of the transaction with the end of maximize the profit in detriment of the other party, these problems are often called as "Asymmetry in the information". Knowing this the establishment of contracts based in outcomes, more that in the behavior allows to adapt the preferences of the agents toward the preferences of the principal because the compensation as a element of the outcome make that each party break the tension between the own interest (asymmetric interest).

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

Besides, the establishment of information systems, have allowed to the principal being aware of the behavior and the activities of the agent reducing the asymmetry in the information and agent performance. In 1976 Jensen and Meckling [2] main developers of this theory described that the agent will not always act in the best interests of principals, as the objective of the principal is maximize the profit, it is the same situation in the case of the agents who tend to act in their own best interests. This case is a classical struggle of pulling the rope between the employee and the employer. Part of the development of this theory includes the price theory mechanisms and hierarchy mechanisms. The authors also refer the Agency Costs, Therewith to understand the additional cost due to the Agency Problem: a) Cost of formalization, due to the design and redaction of the "Contract". b) Cost of supervision. c) Cost of guarantee. d) Residual loss (As part of the adopted decisions by the agent, showing deflection in terms of what the principal would have done in that situation). In the literature there are different focuses around the compensation policies, the incentive alignment consider the different types of tradeoffs between behavior oriented (salary) and outcome-oriented (commissions, equity ownerships and other devices) compensations (Eisenhardt 1989) [3].

Eisenhardt examines the governance using the monitoring using trade-off elements between horizontal (agentagent) and vertical control (agentprincipal). Having knowledge of this disparities that seems to occur in certain enterprises in terms of the asymmetric information, the principal must to know that not always his/her interest are perfectly align with the employee's interest. The motivation can be an important element; the principal can use different ways of compensation like bonuses, promotions, improvement in work conditions, satisfaction of needs; as long as the interest of agent turns toward the principal's objective. The motivation appears to be as an important tool for organizations that can be used to change the objectives of the agents, encouraging the corporative culture, the beliefs in the objectives of the enterprise, the pride of working in team, among others, can be planned as to many ways to reduce the differences among the objectives of the agent (the employee) and the principal (employer). [4] Method and Findings. In order to get a wide overview of the Agency theory, the principal-agent problem, and the asymmetry in the information in one organization was developed a bibliometric search using several databases. The objective in the findings was get an empirical information about the relation of the strategic human resource management and the agency theory, and second, bring some empirical and

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

theoretical information about three important elements of a health system, the patient and the health care provider, the health care organization and the international health organizations. The general overview includes: The relation principal/agent among the health actors and the asymmetry in the information, principal/agent problem, including a top-bottom outlook as follows: Agency Theory in international Health Care Organizations, The Agency Theory and its importance in enhancing the quality in the hospitals, and the Agency Theory as a important key element in the relation Patient Physician. Understanding the levels of control and Agency Theory: The Article 1 [5] named "Agency Theory Implications for Strategic Human Resource Management: Effects of CEO Ownership, Administrative HRM, and Incentive Alignment on Firm Performance" developed in the Cornel University ILR School in 1996, intends to analyze several hypotheses on the effects of the CEO (Chief Executive Office), the administrative HRM (Human Resource Management) and incentive stock ownership on firm performance. It is well known that human resource management nowadays has becoming an important strategic partner within the organizations, helping businesses to transform and become more competitive. This study primarily intends to show the importance of analyzing the Strategic

Human Resource (SHRM) by examining different lens, giving an different approach as usual, to SHRM, focusing in the Agency theory. As an important element in various of HRM it has yet to consider the monitoring, as a element that ensure the enforcement of the contract. in this way this study was carried out over three forms of organizational control, specially the CEO control, bureaucratic control and incentive alignment on firm performance. As we can see in this case we are intending to understand the model of service provided by an individual in one organization, how it was already explained, Eisenhardt [3] suggest that the Agency Theory can be more evident where the outcome uncertainty is high, given this the authors of this study want to assess the IPO (Initial Public Offering) firms, firms whit a wide range of risks, with a high degree of outcome uncertainty. Agency Costs and forms of monitoring The control of the activities of the agent according with the theory can reduce the conflict of interest that inevitably happen when the principal delegate over the agent responsibility and authority. Agency cost include cost of monitoring, binding and residual loss, the cost of monitoring are the cost implicit directly controlling the actions of the employees (agent), e.g. creating administrative functions as Human Resource (HR) department, hiring supervisors, implementing incentive systems; bonging cost arise and are present

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

when the agent are required to continue activities to establish their credentials providing certain warranties to their employees; by last the residual loss is defined as the cost to the employer when the outcome of the agent does not fulfill the (100%) of compliance. The monitoring cost is the element that the authors gave more interest, this due the fact, that the monitoring (supervision) is one of the most important element in HR departments. Agency theory says that the performance improves when agency cost are reduced. in the case of large organizations when the manager is separate form control, or CEO decrease ownership, agency cost seems to increase. In this way the main objective is minimize the monitoring cost by relying the manager monitoring within the work force using bureaucratic controls or incentive alignments systems. Hypothesis of study: The authors hypotheses: described three

ownership, the presence of incentive stock options for all employees will have a positive effect on firm performance. Methods: The study took a sample of 107 IPO non-financial companies. The sample characteristics were the following: in average 11,66 year old, around half of the firms were less than 6 year old, 25% of the firms in the sample had more than 500 workers. Most of the businesses were located in U.S.A. (24,1%). Independent variables: The CEO Ownership is an important element, in the study they decide to measure this variable after IPO not before; The logic says that "the higher is the ownership the more direct will be the monitoring of the top manager over the employees" To assess this logic (quartiles) based of CEO ownership and ANOVA's, following this logic were done to understand the behavior, the first quartiles show to be more likely to have an Administrative HRM function than the last two quartiles. The bureaucratic control via administrative (the inclusion of HRM executives) and Incentive alignment via incentive stock option, were the two last independent variables. Dependent variables: Were assessed variables such, Stock price, economic performance, sales and productivity, which are variables with certain level of dependency in the firm performance. Control variables: employees, net profit. Number of

Table 1. Hypotheses to be tested 1. CEO ownership will be positively related to firm performance. 2. After controlling for CEO ownership, the presence of a bureaucratic (or administrative) HRM function will have a negative impact on firm performance. 3. After controlling for CEO

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

Results: The results for Hypothesis I (Table 1) showed that high levels of CEO ownership enhance performance, the used regressions to predict the firm stock price, sales and productivity, the realized that the results had an ambiguous outcome, only 50% of the data follow the hypothesis, as follows, CEO ownership had a positive impact in sales in the years of (1990 -1992) but had a negative in other years, on the other hand CEO ownership showed negative effect of productivity and no effect of performance. The results for the Hypothesis II and III (Table 1), showed an expected outcome, as long as the bureaucratic control (AHRM) affect negatively the performance and affect the future stock prince, and the ISO (Incentives Stock Plan) based in the stock behavior predict a future good price performance, in short, AHRM lead to negative effects in the firm performance and ISO lead to positive performance. This paper according with the authors had the intention in contribute more to the knowledge in the Agency Theory and the Human Resource Studies. As we already know, the Agency Theory explain how the self-interest lead to have different behaviors in terms of being a Principal or an Agent, the Principal as the leader of one organization always will try to follow the firm or organization's objectives, with the higher profits as possible, it means, at the same time the agent will try to do their jobs using the lowest cost possible for him in order to have a higher profit. (in this case the cost in abstract terms means lowest effort for the agent to achieve the objective), is well known

that in terms of the relation PrincipalAgent in this case CEO and employees there is information that the principal do not know about the agent work, this information basically is the one that reflect the effort, the agent performance, and the way to achieve certain objective, the principal do not know this information because the agent manage this situation to selfconvenience (Principal Agent Problem). So in this case this Article point three main important elements used in the Agency Theory to solve the asymmetry in the information, outcome of the known "Principal - Agent Problem" The Controlling using the CEO ownership (direct), the use of Human Resource Management and the use of Incentives. The study focused in IPO firms, used the ANOVA multivariable way to understand the behavior of several variables, independent and dependents. We can see according with the results of the hypothesis I, that there is an inconsistency or there are variables affecting the firm performance in a nonlinear way, the authors explain that different levels of CEO ownership lead to enhance firm performance, but their mixing findings, as how the CEO ownership have a positive impact in sales, but negative in performance in certain periods of time (1993-94) give a strong evidence that measuring the performance of a complex IPO firms can not be directly measured, whenever we know that the financial world owns huge complexities, the linear thinking CEO ownership Lead to Firm performance is incorrect, we know

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

each firm has different elements, for example "Firm Strategy", is clear that this strategy can no be measured, only the Stock Price, anyway as one individual, each firm has its own behavior and its own environment, so in this way trying to fit the final outcome of the firms with this model of controlling agents would be inadequate, and maybe this is a limitation that the agency theory owns. In terms of the study they used a telephonic survey interview, indirectly they asked about this three types of models used for controlling, They figured out that the last quartile in terms of CEO ownership had a non authentic leadership more focused in transactional actions, so we will see an unhealthy approach of the CEO over the agents, that will affect the motivation and the working conditions negatively. This is other weakness of the Agency theory, in this case the authors didn't mention in their discussion something related to the agent motivation (in holistic terms); we can identify the Agency Theory as a new way to see the employees in terms of performance, controlling and compensations, but this theory remain the original thinking of the 70s about the Z and X theories which have a dual view of the employee in terms that they are un-efficient and efficient employees, the situation here is that using the linear thinking we can not see that the motivation, not only in terms of compensation can play an important role in the firm performance, the motivation can be wide scope, as we can understand that motivation in individual terms is subjective.

Good working conditions, good communication and healthy working environment can change the way as we see the agent (employee) outcome. Not always the employee is responsible for a bad outcome, sometimes there are external and holistic variables that we can no measure that can affect the outcome and the behavior of our personnel. So is more evident that the Agency Theory is simplistic whenever it focuses just in the way of controlling the agent costs neglecting environmental variables. The Administrative HRM in the results as was predicted for the authors showed that AHRM had a negative effect on future firm performance. the ISO (Incentives mechanism) had a positive effect on future firm performance. Looking at this information and the linear thinking it is probably that maybe this behavior is not certainly accurate. The Incentive alignment is shown as viable form of directing the employee actions even in absence of HRM, being consistent with the Agency Theory; so the ISO lead the employee easily toward principal objective as well as the productivity was shown increased in firm with this policy of compensation, it maybe can happen in short periods of time (as the American way seems to work), or in short as a transactional way, the security, and motivation holistic elements shown in mid and long terms can change the agent behavior in a positive way for the

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

principal and the firm this is seen in (Japanese enterprises), in this case the firm not always makes the employee have as a final wish a huge wage, but they provide security, and other holistic elements that lead the employee until self-satisfaction more than a simple economic wages. In this case the employee follow the principals will, because its own will. Knowing this, we have to understand the importance of the leadership of the Principal, and how to be and authentic leader, the one who with his/her actions, without controlling elements (Agency-Theory) lead the employees to follow a common objective. The Agency theory among National and International Health Care Organizations and National Hospital: A General Overview. Examining the first relation Principal Agent (National Health Systems and Health Organizations) and the other two relations (Hospital - Physician) and (Patient - Physician). Article 2 [7]: Principal-agent problems in health care systems: an international perspective. University of Oklahoma, year 1997 The study of The Agency Theory can be multivariable, as long as we identify who is the Principal and who is the Agent we can conclude and know more about this theory of organizations. In this second report study, which is not certainly an empirical assessment is intended to describe the health care systems as a whole in one international perspective, in terms of the Principal-

Agent problem; we already know some of the controlling elements being used in one organization, and as an important element in this paper, it is important to provide a general and macroscopic view of the Health Care Organizations and the Agency Theory, so in the first part of this Top-bottom analysis, we will start studying the Principal-agent problem in Health Care Systems (HCS). There are many methods to organizing a Health Care System, in the majority of the cases the outcome is oriented in the efficiency, as a element which use to fail in our traditional understanding of one HCS, the paper had as an objective examine the Agency Theory over three key elements in one HCS the raising of finance, the transfer of funds to hospitals, and spending by hospitals. Features of a Health Care Systems: Universal access, Complexity and uncertainty, Information difficulties, Market failure, Technological Progress and Changes in demand. The financing appears as an element that link all these features described so that is why they authors of this paper, follow the study around these three key elements of financing. To describe who is the principal, and who is the agent in this case may result complicated as is complex one health System it self, however, this graph (fig 1) extracted from the original paper can give us a general understanding of how the author identifier the Principal 1 and the principal 2 in the complex chain of value in one health care system.

The Incentives and the Agency Theory: A conceptual approach and a general review of empirical studies in Health Care Organizations.

in which the clinician is involved as well). This paper argues that whoever system of fees for service is used it is likely influence the hospital behavior in a profound manner with incentives. Financial considerations should not distort the efficiency, but it is difficult to use a model in a system of payments that have as a result an efficient resource assignation. Several countries use mixture methods of payment, based in budgetary flexibility related to fixed costs and variable costs of the honorariums (Germany, Netherlands and Switzerland). The principal-agency relations in health care (Jones and Zanola) [6] recalling some elements of the Agency Theory the contract implicit or explicit is the basic mean to overcome the asymmetry in the information, as well the control mechanism already described in previous analysis, using these types of contracts we can lead to guarantee the basic offer, and contain the risk for the misbehavior of the agent. The literature review done for the authors reveals that there are more studies and papers in Agency Theory focusing in the relation PatientPhysician, this can be completely understandable as long as that relation is the core in the role of the health care system. To understand how the authors describe the agency, in terms of the HCS, the hospital, the physician and

Fig 1. Relation among principal and agents among health care organizations.

So in this chart we can se how the (principal 1) is the one who raise the funds for the health care system. (Governmental body, or insurance agency) in a financial framework (raising of finance, the transfer of funds to hospitals, and spending by hospitals. The hospitals can be considered the direct agents of principal 1. However, the governing boards of hospitals themselves can also be considered as principals (principal 2), on the management side of the process, in the sense that they must fund and control individual clinicians. The ultimate agents are therefore the hospital operational managers and doctors. In general the rewards of these are likely to be linked to measures of process, or financial measures such as costs or revenues, the clinician as an agent may be the servant of at least two principals: the funder and the hospital, (later we will see other Principal Agent relationship

The Incentives and the Agency Theory: 10 A conceptual approach and a general review of empirical studies in Health Care Organizations.

the patient, we draw in this way. (Table 2) Table 2. Principal - Agent Relationships in the Health Care System Principal1 (Government health bureau) - Agent 1 (Hospital). Principal 2 (Hospital)- Agent 2 (Physician) "Both sides agency" Principal 3 (Patient) - Agent 3 (Physician) "Both sides agency" We can see how the physician become a two side agent seeing that the relation that hold with the hospital and the patient is held in different ways, using formal and informal, implicit and implicit contracts. As incomplete agency relationship in healthcare can be present when: (1). the physician may commit mistake regarding the patient interest, (2) the physician may lack perfect information regarding the effectiveness of the treatment regime, (3) the physician may mislead the patient regarding the effectiveness of the treatment. The number 2 and 3 can be product of the uncertainty but can be as well product of the opportunism, physician can increase it income by pursuing one course of action over another. In some health care systems the patient have the freedom of choice, The physician behavior described in the numeral 2 and 3 and the additional lack of financial control over physician

had lead to a rise in the US health care costs per capita (showing a misbehavior on behalf the agents involved in this system). Regarding the complexity of the principal agent problem in health care system, and given the conflict of interest, knowing the experience of five health care systems (Austria, Germany, United Kingdom, U.S.A. and The Netherlands) described in the article we can understand different ways to handle the problem described by Eisenhardt [3] in its Agency Theory. Is well known that one universal objective of all the HCS is satisfy the real needs in health care in one objective population, this the maximum efficiency. Germany, Austria and The Netherland give an importance to the full coverage (universal access), the U.S. focus in the variety and diversity and the U.K. in the equity. In all these HCS the control of hospital is a concern given the three flows of funds, which are crucial to ensure the control of the total cost in health care, all the systems are converging in have the physician as the "Gatekeeper". U.K. and U.S.A. have been using the incentives elements for Agent 1 in order to avoid excess in costs. There are a wide variety of schemes used for remunerate the hospital for additional workload used in these HCS, insensivity in short term to additional workload (Netherlands, UK) to full recovery reimbursement. Prospective payment under DRG or fee-for-service (Austria and Germany), these mechanism lead to bring a wide variety of incentives to hospital in relation to

The Incentives and the Agency Theory: 11 A conceptual approach and a general review of empirical studies in Health Care Organizations.

the types of patients they seek to admit. All this mechanism cannot be completely successfully implemented there are not control mechanisms (bureaucratic control, incentive alignments) over physicians. According with my experience in the health field there is vision that is not being addressed in a correct manner. The way as the author perceives the relation "Principal3 (Patient) Agent 3 (Physician)" this is because we can not fulfill completely the Agency Theory, whereas the profit can be part of the main concern of both parties, but the welfare of the patient is not conditioned for the patient in terms of the lowest cost to enhance the profit somewhat the real concern of the patient is to achieve the welfare, so in this case who has total control of the situation is the doctor, so the information asymmetry is quite. This not holistic vision, make us to believe that the patient is more concerned with having lowest costs, without having a clear vision of the outcome, which is not true, in most cases the main concern of the patient is to achieve the complete wellbeing, so they act blind without any knowledge about the real cost of the medical judgment. Something interesting that we can see is reflected in some countries is the relation (3) where the pharmaceutical companies have an important role encouraging and promoting their products on own behalf, inducing the physician behavior (either through lack of knowledge, or economic interest by

external benefits agreed between the pharmaceutical and physician). In my experience, the "Pharmaceutical Sales Representative" - Physician relationship is harmful, and have to be regulated, because it doesn't matter how the incentive the hospital give to their physicians in order to reduce cost in health delivery if the incentive given for these Pharmaceutical laboratories can be several times higher. In my country "Colombia" this activity is not well regulated, on the other hand the price of the medications compared to the world is rather high, so this relationship have been harmful for the Colombian Health Care System and have lead this system to a general crisis. Given this I jus wanted to describe a new model of Principal-Agent Problem that must to be analyzed in the future in order to have evidence to show to our Health Bureau to regulate this unhealthy relation. As a conclusion of this paper, it is important here to see as well, how the incentives have to be abolished, as a mechanism of control over the physician, it is not an easy to know how, but, the change of the preferences of the agent toward the principal objective without using external elements seems to be the best tool, the shared profit can be used as a addressing element, but in complex health care systems is unreal to have this mechanism, whenever the principal become and agent and the self interest as a selfish feature of the human being is always present.

The Incentives and the Agency Theory: 12 A conceptual approach and a general review of empirical studies in Health Care Organizations.

Anyway the increasing of the cooperation among physicians, and health care providers reflect the desire of solve the Principal - Agent Problem through the behavior instead of contractual means. The Agency theory among Hospitals and Physicians. Examining the second relation Principal - Agent (Health Organizations and Physicians) Article 3 [8]: Enhancing board oversight on quality of hospital care: An agency theory perspective, year 2012. Following the top-bottom analysis, as a first part of the chain was explained the multirole that play the National Bureaus of Health with the hospital, the Hospital and the Physician and by last the physician and its patient., all the previous relations in the AgencyTheory framework In this outlook we are going to focus our attention in the relation intended in ensure the quality of the hospital among the Staff and the Physicians, in this case the Quality is the Staff's or Principal's objective. (Physician as agent and the Staff hospital "Board hospital" as the principal) The Staff objective is a required action that the Bureau of Health has set as mandatory, as we can see this second relationship among the Health Bureau and the Staff Hospital is a supra relation principal-agent. This study was addressed over all community hospitals in United States which according the criteria were

eligible to be assessed, further, those hospital which are offering short-term, general o another federal special services and those hospital which according with the database in the last five years have reported a quality performance. In order to give a short overview is important to said that big purchasers as Medicaid and Medicare have implemented the "pay-for performance" initiatives through changes in payment rules. In response to these external pressures the hospitals have had implemented internal policies in order to improve patient safety and general quality. Knowing this and the importance of the quality in order to increase the profit according with the federal requirements, the authors of this article developed in 2011 four surveys over those organizations, which had reported hospital-governing practices of quality and patient safety. The medical staff has tremendous influence in the quality an the appropriate use of resources, in short the board is responsible for the quality of care, and the medical staff is delegated (operational responsibility). The relationship between hospital and medical staff is difficult to manage, because as we have seen in this case the agency theory show us that each party bill their services separately, as a result of this both parties do not align well their financial incentives. Both have different economic goals and objectives.

The Incentives and the Agency Theory: 13 A conceptual approach and a general review of empirical studies in Health Care Organizations.

Overcome this issue can be possible as long as we facilitate the physician leadership and involve them in quality oversight Provide care can be complicated, the treated patients can be have a enormous variety of diseases and conditions, as well the treatment and procedures can differ substantially so that is why the outcome it self can be not only relate to quality of care, but also to the patient current situation. As we can see in this case, here appear an important opportunity for asymmetry in the information; in order to avoid this opportunity for the agent we need to monitor the income/outcome validating the information on hospital quality performance. The board should regularly check the quality even hold management for meeting specific quality and patient safety goals, in short, the central issue in one hospital governance is about accountability, governing board should aid to enhance the accountability: e.g. overseeing physician credentialing, quality committees, involving management and leadership of quality issues. So in short this paper they developed a methodology around those 4 surveys developed by the TGI (Governance Institute) and the and the CMS (Hospital Compare Data), so the objective was correlate the data the identified 13 questions which the authors found quality related with the quality measures and the data from the CMS focusing in the process of care using the general set measurement

units for hearth attack, heart failure and pneumonia (encompassing over 20 measures). The number hospital suitable to be evaluated was around 445, which I consider is a representative sample, which represent more than the 16,8% of the population, so it is significant at least statistically. After matching the data with the TGI and the CMS information, the authors developed a table containing the values for the survey's related questions to quality performance, using the quality of measure of the process of care and comparing it there is a relation among the implementers or quality adopters and enhancing the process of care, certainly after this it was evident the relative improvement in the process of care as a quality care measurement unit in the hospital which implemented or adopted quality performance initiatives, however seven have enough statistical significance to make a general conclusion about the results, these questions are the following ones with its statistical significance in favor of enhancing the process of care once it was performed a quality of care initiative, the statistical relevant element are shown as follows; relative statistical significance (p<.05): (1) requires the hospital to report its quality/safety performance to the general public, (2) requires major new clinical programs or services to meet quality related performance criteria; were strong statistical significance (p<.01): (3) requires management to base at least some of the hospital's quality goals on the "theoretical ideal" e.g. zero central line infections, (4) reviews quality performance measures

The Incentives and the Agency Theory: 14 A conceptual approach and a general review of empirical studies in Health Care Organizations.

using dashboards, balanced scoreboards, run charts, etc., at least quarterly to identify needs for corrective action, and very strong statistical significance (p<.001): (5) At most board meetings, devotes a significant amount of time to quality issues/discussion, (6) Both the board and the medical staff are at least as involved or more involved than management in setting the agenda for the boards discussion on quality, (7) Has a standing quality committee of the board. Looking at this information we can have enough evidence to show how on the elements which is central in agency theory is playing an important role here, this element definitely is the monitoring, the monitoring as a mechanism of controlling the agent actions, however, in this case we have a board hospital as principal and in a dual manner the medical staff as principal - agent, which makes a little bit complicated this relation, but if we understand the medical staff as a part of the bureaucratic control over the physicians actions can be explained as the second part of the mechanism of control known to avoid the asymmetry in the information (principal agent problem). So as we can see the element (4) as the first mechanism of control of the principal over the agent; the elements (1) (2) (5) (7) as the second mechanism described, bureaucratic control, the incentive as a mechanism of align physician and staff hospital does not appear to be clear immediately, but I have recognize two possible ways of reward of incentives that can toward the principal's objective

the actions of the agents, the first is the involving the agent in the active leadership, this incentive mechanism maybe it is not related to an economic gain, but it can be related to a status which increase the esteem in social acceptance, becoming this as a motivation tool over the physician's actions. The second is itself the physician status, because the actions and the quality measures use to be related to each doctor and specialty, so the score it is not only show by hospital, but also by physician specialties, and we know how important is the acknowledgment for the doctors, whenever that their reputation should be maintained as high as possible, because is not the hospital which keep the patient, is the doctor who by their actions remains a bond of trust with their patients, so a change in perception of the patients about their doctor, or an affectation in his professional reputation, could mean a huge cost for the doctor. (Sometimes irreparable). To complete the analysis of this article, it should be added that in this case the shared governance, seems to be a mechanism that avoids the use of human resources offices as bureaucratic mechanism which as well can directly involve the activity of agents with the principal's activities, this is translated in make agent turn their actions toward the principal's objective, thus overcoming the principal-agent problem. After understanding the relationships established from the government, health provider organizations, hospitals and doctors, we reached the end point,

The Incentives and the Agency Theory: 15 A conceptual approach and a general review of empirical studies in Health Care Organizations.

the central and most important point in the health care delivery, defined as well as the goal of the entire health value chain. "The patient". But how to define the agency theory from the perspective of the patient?, This is not an easy task since there is the patient who does not have the information (asymmetry in information), and certainly does not have direct mechanisms of monitoring, only its own outcome as a monitoring tool for the principal (hospital). Thus we see how the physician or health provider from both optics Hospital - Patient, is an agent. With the desire of understanding these relationships which are not well documented in the literature, were taken two studies, one focused on the changes of information between patients and medical group due to bias, and the incentives to doctors for health promotion as a mechanism to align the physician interest with other principal's objective (health care provider). The Agency theory Physicians and Patients. among

physician/agent, we are going to keep this understanding in order to provide a wide overview of two different ways to see this complicated relationship. Therewith, the previous definition remark the relation is important, first the patient act as principal once that he/she sets the objective and the doctor as an agent whit his/her knowledge become the decision maker supposing that he is acting on behalf of the patient and maximizing his/her utility, we can see that the physician adopt a role congruent with the patient's whishes. The issue comes when we try to define the utility between agent and patient even when the interest of increase their own profits doesn't be to clear as long as we do not see the relation between health or wellbeing with profit. Other part which is important to remark is the asymmetry in the information on the patient's preferences, in this point if the physician act against the patient preferences imperfect agency will arise even when the doctor intends maximize the patients utility. Thus one source of incompleteness in the agency relationship is that the provider may respond to an incomplete or biased perception of the patient's interest (Evans 1984) [10] The suggestion for the analysis is that the provider is not aware of the patient's preferences. So in this paper the authors intends to understand from agency theory the patient preference pattern for maternity ward attributes with the care-gives

Examining the third relation Principal Agent (Patient and Physician) Article 4 [9]: Agency in Health-Care: Are Medical Care-Givers Perfect Agents? Bar-Ilan University - Israel, year 2007. Defining the relations it is important, sometimes it is no easy to know who is the principal in one relation as the physician - patient, the general overview define as patient/principal and

The Incentives and the Agency Theory: 16 A conceptual approach and a general review of empirical studies in Health Care Organizations.

perception of these preferences and thereby offers evidence for the incompleteness of the agency relationship The methodology which is a novel experiment in this field used a DCE (Discrete Choice Experiment), designed to look at the impact of different attributes on the overall benefit obtained from a particular good or service (Lancaster 1966)[11] This technic uses hypothetical realistic scenarios which varies according with the attributes, becoming a factorial analysis which is reduced in 16 scenarios after managing the trade-off of the attributes, the DCE was carried in three stages (1) choosing the attributes of the service and their levels, (2) defining the experimental design, (3) Implementing the DCE in the hospitals objective, and by last (4) Data analysis, employing randomeffects probit regressions. Using an complex equation, knowing the scenarios, the possible changes among one scenario A to one scenario B and the changes in the utility, after doing the survey and the analysis over 323 women who were evaluated, the results were the following ones: The medical staff has a biased perception of preferences of the women they are treating. According with the ranking of attributes using to determine the preference of the patients, and the preferences which the physician think the patients have, it was completely evident that the physicians do not know really the patients preferences, so in this case looking at the patient as a principal, the agent even when he/she wants to

pursue the principals goal, if he/she does not have clear the principals objective a problem in achieve the principals goal will appear. So certainly the results as example shown: the first attribute in score for patients was the professionalism of the staff, the doctors thinks that for the patient the most important attribute is type of room, more evident can not be this bias that the physician use to have over the patients, sometimes the doctors have a bias underestimating the patient appreciation upon their professional skills. This we can see how the agent has a biased perception of the principal, therefore a perfect agency doesn't exits. In general terms this paper intended to give evidence about the bias in the relation patient and doctor, however, it is not clear to see how the agency theory works, as long as we do not understand how the patient as a principal and the doctor as an agent try to increase their own profits, even using the profit not in economic term, in metaphoric situations "wellbeing" the relation it is not clear at all. Anyway we can see how the bias upon the principals goal "Perceived goal" can affect the agent behavior and affect the outcome, in this case it its important enhance the communication within both parties in order to overcome this barrier which looks not to complicated as long as the wages, and the economic benefits are not implicit in the relationship. Article 5 [12]: Principal Agent problems in Health Care: Evidence from

The Incentives and the Agency Theory: 17 A conceptual approach and a general review of empirical studies in Health Care Organizations.

prescribing patterns of private providers in Vietnam. University of California, Berkeley, year 2011. In the Article 4 we figured out how the relation between the principal and the agent can be affected by the biased agent understanding about the principal's goal, even, when it is evident the agent intend to be a perfect agent, or want to achieve the principal's goal. In this article we are going to see this relationship over other perspective, this perspective is framed in the use of economic incentives, related to increase of the general expenditure in outpatients treated, action that lead to increase the income of the private hospital which reflect in the same way increase in the physician's revenue. This mechanism of incentive it is interesting in the way that is used by the other principal (Private Hospital), to lead the agent (physician) to increase the income of the hospital giving a percentage of the total income per service provided to each patient (secundary Principal). We know that due to the conflict interest the action to induce the medication over the patient, selling the product as a pharmacist during consultation is forbidden in Vietnam. But despite the legal framework, the regulation is weak, and it becomes more evident in rural areas. The incentive structure described before where the physician encourage the use of medications (injection) in order to increase to general cost of the service to increase the hospital/clinic

revenue, affect theoretically the patient, because each health provider will have more interest in increase the own profit increasing the number of hospital services than pursue the patient's goal (real well being). The agency theory in this case is expressed when the patient appoints a physician or doctor to advice the principal in making decisions about treatment, according with the professionalism of the agent (doctor) is expected that he is a perfect agent, so combing professional knowledge and the patients preferences he would have to determine the most suitable choice for the patient, however, the problem "principal - agent problem" described several times in this paper appears once the provider chooses increase his/her own interest, which in this case according with the incentive structure in the private hospitals in Vietnam do not align with the patient's interests. We know why the problem is presented, is because the asymmetry in the information. As in the previous article the doctor is who has a greater knowledge of the patients condition that the patient has, due to the complexity of the health and medicine, the information asymmetry between the principal (patient) - agent, is more severe than in other markets or organizations. The physician-induced demand is often referred as a common principal agent problem, in my experience as a pharmacist, I can say that is this asymmetry in the information which lead the pharmaceutical laboratories to do aggressive marketing campaigns on doctors, using in some cases

The Incentives and the Agency Theory: 18 A conceptual approach and a general review of empirical studies in Health Care Organizations.

incentives alignment, which in some countries is not well regulated. In Vietnam the drug prescription and dispensing in the same time becomes more complex, because the principalagent problem can have more direct impact. This behavior in all the perspectives is inadequate, because affect the user expenses, affect his/her health, and can lead to the irrational use of medications, in this case the medications should not be used for the condition presented by the patient, because in long term can affect his/her health, this in turn can lead to all sorts of medical complications from microbiological resistance, to unnecessary manifestation of adverse reactions among others. In order to understand this behavior and realizing that, asses the providerinduced demand is easier to infer than to prove the author developed the three following hypotheses: Table 3. Hypotheses to be tested 1. For a similar patient and illness profile, private providers prescribe more drugs for each outpatient contact than do public providers 2. For a similar patient and illness profile, private providers are more likely to prescribe injection drugs in an outpatient setting than are public providers 3. Highly educated patients both receive fewer drugs and are less likely to receive injections than are lowly educated patients. The effect of the patient's education is

stronger in the private health care market than in the public health care market. The data were collected from the Vietnam National Health Survey, from 158.000 patients, the key elements of the survey was addressed in the question where was asked about if the responden had incurred any illness and injury during the four weeks preceding the survey, what severity and type of the illness, and wether the responden had sought treatment. In order to do more easy to understand the variability in the data, the author select only the patients with only one condition which sough formal medical assistance. From the 158.000 respondents, 63.406 reported having illness or injury over the four weeks, of this amount 53.299 had only one problem of health, and only 28% of this amount of population sought normal medical care, so the population of study was 12.300 patients. Two outcomes of interest were included (number of medicines prescribed and dispensed in an outpatient contact for curative care). So the objective as the hypotheses say is to evaluate how the outcome is affected among providers (private), as well looking at the differential effects over different populations (educational background of the patient). The results were as they expected, a concerning result is that 95% of the consultation were sold medications, which is a concerning value about the

The Incentives and the Agency Theory: 19 A conceptual approach and a general review of empirical studies in Health Care Organizations.

weaknesses of the regulation over this misbehavior, The results shows that in average the number of medicines prescribed for each of five health conditions and for each severity level separately, in all the cases described the private providers prescribed more medicines that any of the public categories. e.g. respiratory disease, a contact with the private providers entailed 4,11 drugs, and in public providers 3,88 (difference with statistical significance). This pattern is repeated in medications for infections, injures etc. it shows that the private providers prescribe more drugs per outpatient contact than do public providers. On the other hand an important evidence appear seeing that the average number of medications for the same disease becomes higher in private hospitals located in urban areas, in the agency theory perspective, we can see how the government regulation (as Principal) in urban areas can make a monitoring over the double agent (hospital and doctors) in order to protect the Patient as a recipient Principal. Moreover another evidence appears, related to the principal agent problem, in this case comparing the information of the type of patients treated, the ones with lower education has a high probability to receive more medications, than the patients with higher educational status. Recalling the asymmetry in the information, once the patient has health literacy related to his/her educational

background the asymmetry becomes smaller which makes the patient be more aware of the physician decisions, affecting the physician behavior. As a conclusion of this article which was more focused in one relation ship important for health care organizations, than the organization itself, is important to learn about how the incentives can affect the agency according with the perspective that we can see, in this case the physician behavior was turn toward the private organization's goal, despite of the ethical issues which it incurs, as well we understood how the asymmetry of the information in this case can be reduced once the patient has higher literacy levels, reducing the asymmetry in the information. The monitoring as a tool of control was evident in the case of the Health Bureau of Vietnam, in this case vainly the office make regulation over patient, and health providers in this cases in order to avoid this misbehavior against the patient. This monitoring in other level of agency can be used for the government as a mechanism to avoid that, health organizations act in own benefit more than the patient's benefit. References. [1] Rumelt R., Schendel D., Teece D., Strategic management and economics, Strategic Management Journal, Volume 12, Issue S2, pages 529, Winter 1991. [2] Jensen M., Meckling W., Agency Costs and the Theory of the Firm, Journal of Financial Economics, 1976. [3] Eisenhardt, K.,Agency theory: An assessment and review, Academy of

The Incentives and the Agency Theory: 20 A conceptual approach and a general review of empirical studies in Health Care Organizations.

Management Review, 14, pp. 5774 1989. [4] McMillan, John; Games, Strategies & Managers, page. 92.,New York: Oxford University Press, 1992. *[5] Welbourne T., Cyr L., Agency Theory Implications for Strategic Human Resource Management: Effects of CEO Ownership, Administrative HRM, and Incentive Alignment on Firm Performance, Cornell University ILR School, Center for Advanced Human Resource Studies, 1996. [6] Jones A, Zanola R. Agency and health care, Centre for Health Economics, University of York, 1995. *[7] Smith P, Sephan A, Valdmanis V. Verheyen P, Principal-agent problems in health care systems: an international perspective, Health Policy 41 3760, 1997. *[8] Jiang H., Lockee C., Fraser I., Enhancing board oversight on quality of hospital care: An agency theory perspective, Health Care Manage Rev, 37(2), 144Y153, 2012. *[9] Neuman S., Neuman E., Agency in Health-Care: Are Medical Care-Givers Perfect Agents?, Institute for the Study of Labor , IZA, Discussion Paper No. 2727 April 2007. [10] Evans, R.G., 1984, Strained mercy: The economics of Canadian medical care (Toronto, Butterworths). [11] Lancaster, K.J., 1966, A new approach to consumer theory, Journal of Political Economy 74, 132-157.

*[12] Ha Nguyen, Principal-Agent Problems in Health Care: Evidence from Prescribing Patterns of Private Providers in Vietnam, Stanford University, Walter H. Shorenstein AsiaPacific Research Center Asia Health Policy Program, 2007. *Articles of central analysis.