Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?
SIEPR Discussion Paper No. 11-017
92 Pages Posted: 5 Jul 2012 Last revised: 1 Aug 2013
Date Written: March 31, 2013
We investigate whether physicians' financial incentives influence health care supply, technology diffusion, and resulting patient outcomes. In 1997, Medicare consolidated the geographic regions across which it adjusts physician payments, generating area-specific price shocks. Areas with higher payment shocks experience significant increases in health care supply. On average, a 2 percent increase in payment rates leads to a 3 percent increase in care provision. Elective procedures such as cataract surgery respond much more strongly than less discretionary services. Non-radiologists expand their provision of MRIs, suggesting effects on technology adoption. We estimate economically small health impacts, albeit with limited precision.
Keywords: Government Expenditures and Health, Health Production, Technological Diffusion, Procurement
JEL Classification: H51, I12, O33, H57
Suggested Citation: Suggested Citation