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Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care

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  • Christopher C. Afendulis
  • Daniel P. Kessler
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    Abstract

    To identify the important tradeoffs in consulting a single expert for both diagnosis and treatment, we examine the costs and health outcomes of elderly Medicare beneficiaries with coronary artery disease. We compare the empirical consequences of diagnosis by cardiologists who can provide surgical treatment – "integrated" cardiologists – to the consequences of diagnosis by a nonintegrated cardiologist. Diagnosis by an integrated cardiologist leads, on net, to higher health spending but similar health outcomes. The net effect contains three components: reduced spending and improved outcomes from better allocation of patients to surgical treatment options; increased spending conditional on treatment option; and worse outcomes from poorer provision of nonsurgical care. (JEL I11, I18)

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    Bibliographic Info

    Article provided by American Economic Association in its journal American Economic Review.

    Volume (Year): 97 (2007)
    Issue (Month): 3 (June)
    Pages: 1013-1020

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    Handle: RePEc:aea:aecrev:v:97:y:2007:i:3:p:1013-1020

    Note: DOI: 10.1257/aer.97.3.1013
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    1. Hubbard, Thomas N, 2002. "How Do Consumers Motivate Experts? Reputational Incentives in an Auto Repair Market," Journal of Law and Economics, University of Chicago Press, vol. 45(2), pages 437-68, October.
    2. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
    3. Taylor, Curtis R, 1995. "The Economics of Breakdowns, Checkups, and Cures," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 53-74, February.
    4. Asher Wolinsky, 1993. "Competition in a Market for Informed Experts' Services," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 380-398, Autumn.
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    Cited by:
    1. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2009. "The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition," NCER Working Paper Series 42, National Centre for Econometric Research.
    2. Christopher Afendulis & Daniel Kessler, 2011. "Vertical integration and optimal reimbursement policy," International Journal of Health Care Finance and Economics, Springer, vol. 11(3), pages 165-179, September.
    3. Timothy F. Bresnahan & Jonathan D. Levin, 2012. "Vertical Integration and Market Structure," NBER Working Papers 17889, National Bureau of Economic Research, Inc.
    4. Janet Currie & W. Bentley MacLeod, 2013. "Diagnosis and Unnecessary Procedure Use: Evidence from C-Section," NBER Working Papers 18977, National Bureau of Economic Research, Inc.
    5. Jonathan T. Kolstad, 2013. "Information and Quality when Motivation is Intrinsic: Evidence from Surgeon Report Cards," NBER Working Papers 18804, National Bureau of Economic Research, Inc.
    6. Toshiaki Iizuka, 2012. "Physician Agency and Adoption of Generic Pharmaceuticals," American Economic Review, American Economic Association, vol. 102(6), pages 2826-58, October.
    7. Andrew Epstein & Scott Johnson, 2012. "Physician response to financial incentives when choosing drugs to treat breast cancer," International Journal of Health Care Finance and Economics, Springer, vol. 12(4), pages 285-302, December.
    8. Jonathan T. Kolstad, 2013. "Information and Quality When Motivation Is Intrinsic: Evidence from Surgeon Report Cards," American Economic Review, American Economic Association, vol. 103(7), pages 2875-2910, December.
    9. Christopher Afendulis & Daniel Kessler, 2011. "Vertical Integration and Optimal Reimbursement Policy," NBER Working Papers 17316, National Bureau of Economic Research, Inc.
    10. Uwe Dulleck & Rudolf Kerschbamer & Matthias Sutter, 2011. "The Economics of Credence Goods: An Experiment on the Role of Liability, Verifiability, Reputation, and Competition," American Economic Review, American Economic Association, vol. 101(2), pages 526-55, April.

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