A theoretical and empirical discussion of how costs of outpatient medical practice vary with the size of the group providing services. The paper focuses on the incentives of the individual physician to keep the costs of the practice down and his work effort high. Since cost and revenue-sharing schemes tend to dilute this incentive, we would expect that costs would be greater and hours of work less where they are present. The evidence presented in the paper tends to support these propositions. 26 pp. Bibliog.
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