Relative fees and the utilization of physicians' services in Canada

Study Question: The study objective is to estimate the relationship between changes in the relative fee physicians receive for a procedure and the utilization of the procedure. Data Sources/Study Setting: The study uses claims‐based, procedure‐specific, quarterly, aggregate utilization data for physicians in three specialties and four provinces in Canada for the period 1977–1989. Study Design: The unit of analysis is an individual procedure. Multi‐variate regression methods for cross‐sectional/times‐series data are applied to estimate the utilization‐fee relationship while controlling for supply‐ and demand‐side determinants of utilization. Principal Findings: There is no evidence of a strong, uniform utilization response among the 11 procedures analyzed. The results include a mixture of significant and non‐significant fee coefficients, and among the significant coefficients, a mixture of signs is observed. The results are consistent with utility‐maximizing behaviour by physicians rather than with profit‐maximizing behaviour. Conclusions: The fact that the direction and degree of the utilization effect associated with changing fees is procedure‐specific has direct implications for our ability to develop effective policies to modify physician behaviour that are based primarily on financial incentives, particularly those based on manipulating fees. The study also highlights the limitations of analyses based on aggregate data and suggests methodological approaches that have potential to overcome some of these limitations to fill gaps in our current knowledge.