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Medical Reimbursements and Patient Selection by Physicians: A Capital-Theoretic Approach

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  • Hart Hodges

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  • Steven Henson

Abstract

In this paper we use a simple model of patient selection to examine how expected declines in reimbursement rates (including scheduled cuts in Medicare reimbursements) affect decisions made by physicians. Accepting a new patient generates revenue for the physician both immediately and over time, but constrains the physician’s flexibility in accepting new patients in the future. The effects of the constraint depend, in part, on the turnover in patient capital. Findings imply that physicians who have longer-lasting relationships with their patients face higher costs than physicians who have only short-term relationships. For example, primary-care physicians are more likely to close their practices to new Medicare and Medicaid patients in response to expected reimbursement cuts in the future than are providers in consultative specialties. Copyright International Atlantic Economic Society 2009

Suggested Citation

  • Hart Hodges & Steven Henson, 2009. "Medical Reimbursements and Patient Selection by Physicians: A Capital-Theoretic Approach," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(4), pages 397-408, December.
  • Handle: RePEc:kap:atlecj:v:37:y:2009:i:4:p:397-408
    DOI: 10.1007/s11293-009-9193-7
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    References listed on IDEAS

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    1. Biglaiser, Gary & Ma, Ching-to Albert, 2003. " Price and Quality Competition under Adverse Selection: Market Organization and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 34(2), pages 266-286, Summer.
    2. Travis, Karen M, 1999. "Physician Payment and Prenatal Care Access for Heterogeneous Patients," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 86-102, January.
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    11. Victor R. Fuchs, 1978. "The Supply of Surgeons and the Demand for Operations," NBER Working Papers 0236, National Bureau of Economic Research, Inc.
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    More about this item

    Keywords

    Medical reimbursements; Patient selection; I1 (Health);

    JEL classification:

    • I1 - Health, Education, and Welfare - - Health

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