Do Physicians’ Financial Incentives Affect Medical Treatment and Patient Health?

Here’s an interesting paper from Jeffrey Clemens and Joshua Gottlieb.

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 5 percent increase in care provision. Elective procedures such as cataract surgery respond twice as strongly as less discretionary services. Higher reimbursements increase the pace of technology diffusion, as non-radiologists acquire MRI scanners when prices increase. Incremental care has no impacts on patient health.


About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar.
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9 Responses to Do Physicians’ Financial Incentives Affect Medical Treatment and Patient Health?

  1. steve2 says:

    You should read up on supplier induced demand. Frakt has gone over papers on this at his site.


  2. justsomeguy says:

    I’d be curious to know whether primary care physicians at HMO’s have incentives to NOT order diagnostics and NOT refer to specialists.

  3. I don’t think so there should be no impact on patients health…because health is wealth…!

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