Personalized Medicine When Physicians Induce Demand

26 Pages Posted: 28 Nov 2017

See all articles by David H. Howard

David H. Howard

Emory University - Department of Health Policy and Management

Jason Hockenberry

Emory University

Guy David

University of Pennsylvania - Health Care Systems Department

Date Written: November 2017

Abstract

Advocates for “personalized medicine” tests claim they can reduce health care spending by identifying patients unlikely to benefit from costly treatments. But most tests are imperfect, and so physicians have considerable discretion in how they use the results. We show that when physicians face incentives to provide a treatment, the introduction of an imperfect prognostic test will increase treatment rates. We study the interaction of incentives and information in physicians’ choice between conventional radiotherapy and intensity modulated radiation therapy (IMRT) for Medicare patients with breast cancer. IMRT is far more costly. Patients with left-side tumors are more likely to benefit from IMRT, though it is unnecessary for the vast majority of patients. IMRT use is 18 percentage points higher in freestanding clinics, where physician-owners share in the lucrative fees generated by IMRT, than in hospital-based clinics. Patients with left-side tumors are more likely to receive IMRT in both types of clinics. However, IMRT use in patients with right-side tumors (the low benefit group) treated in freestanding clinics is actually higher than use in patients with left-side tumors (high benefit group) treated in hospital-based clinics. Prognostic information affects use but does nothing to counter incentives to overuse IMRT.

Suggested Citation

Howard, David H. and Hockenberry, Jason and David, Guy, Personalized Medicine When Physicians Induce Demand (November 2017). NBER Working Paper No. w24054. Available at SSRN: https://ssrn.com/abstract=3077782

David H. Howard (Contact Author)

Emory University - Department of Health Policy and Management ( email )

1518 Clifton Road NE
Atlanta, GA 30322
United States

Jason Hockenberry

Emory University ( email )

201 Dowman Drive
Atlanta, GA 30322
United States

Guy David

University of Pennsylvania - Health Care Systems Department ( email )

3641 Locust Walk
Colonial Penn Center
Philadelphia, PA 19104-6358
United States

HOME PAGE: http://www.wharton.upenn.edu/faculty/david.html

Register to save articles to
your library

Register

Paper statistics

Downloads
14
Abstract Views
115
PlumX Metrics