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Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending

Author

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  • David Cutler
  • Jonathan Skinner
  • Ariel Dora Stern
  • David Wennberg

Abstract

There is considerable controversy about the causes of regional variations in health care expenditures. Using vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures, this study asks whether patient demand-side factors or physician supply-side factors explain these variations. The results indicate that patient demand is relatively unimportant in explaining variations. Physician organizational factors matter, but the most important factor is physician beliefs about treatment. In Medicare, we estimate that 35 percent of spending for end-of-life care, and 12 percent of spending for heart attack patients (and for all enrollees) is associated with physician beliefs unsupported by clinical evidence.

Suggested Citation

  • David Cutler & Jonathan Skinner & Ariel Dora Stern & David Wennberg, 2013. "Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending," NBER Working Papers 19320, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19320
    Note: AG HC HE
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    References listed on IDEAS

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    1. Amitabh Chandra & Douglas O. Staiger, 2007. "Productivity Spillovers in Health Care: Evidence from the Treatment of Heart Attacks," Journal of Political Economy, University of Chicago Press, vol. 115, pages 103-140.
    2. Mark Pauly, 1980. "Appendix to "Doctors and Their Workshops: Economic Models of Physician Behavior"," NBER Chapters,in: Doctors and Their Workshops: Economic Models of Physician Behavior, pages 119-122 National Bureau of Economic Research, Inc.
    3. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    4. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    5. Mark Pauly, 1980. "Doctors and Their Workshops: Economic Models of Physician Behavior," NBER Books, National Bureau of Economic Research, Inc, number paul80-1, June.
    6. Doyle Jr., Joseph J. & Ewer, Steven M. & Wagner, Todd H., 2010. "Returns to physician human capital: Evidence from patients randomized to physician teams," Journal of Health Economics, Elsevier, vol. 29(6), pages 866-882, December.
    7. Epstein, Andrew J. & Nicholson, Sean, 2009. "The formation and evolution of physician treatment styles: An application to cesarean sections," Journal of Health Economics, Elsevier, vol. 28(6), pages 1126-1140, December.
    8. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
    9. John Ameriks & Andrew Caplin & Steven Laufer & Stijn Van Nieuwerburgh, 2011. "The Joy of Giving or Assisted Living? Using Strategic Surveys to Separate Public Care Aversion from Bequest Motives," Journal of Finance, American Finance Association, vol. 66(2), pages 519-561, April.
    10. Anna A. Levine Taub & Anton Kolotilin & Robert S. Gibbons & Ernst R. Berndt, 2011. "The Diversity of Concentrated Prescribing Behavior: An Application to Antipsychotics," NBER Working Papers 16823, National Bureau of Economic Research, Inc.
    11. Dranove, David & Wehner, Paul, 1994. "Physician-induced demand for childbirths," Journal of Health Economics, Elsevier, vol. 13(1), pages 61-73, March.
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    Citations

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    Cited by:

    1. SUGIHARA Shigeru & ICHIMIYA Hiroki & INUI Tomohiko & ITO Yukiko & SAITO Yukiko & IGARASHI Isao & KAWABUCHI Koichi, 2016. "How do Hospitals Adopt Advanced Treatment Techniques? An assessment through the records of AMI patients in Japan," Discussion papers 16035, Research Institute of Economy, Trade and Industry (RIETI).
    2. Salm, Martin & Wübker, Ansgar, 2017. "Causes of regional variation in healthcare utilization in Germany," Ruhr Economic Papers 675, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Zack Cooper & Amanda E. Kowalski & Eleanor Neff Powell & Jennifer Wu, 2017. "Politics, Hospital Behavior, and Health Care Spending Effect Methods to Examine Treatment Effect Heterogeneity in Experiments for the Young and Privately Insured?," Cowles Foundation Discussion Papers 3006, Cowles Foundation for Research in Economics, Yale University.
    4. Janet Currie & W. Bentley MacLeod & Jessica Van Parys, 2015. "Physician Practice Style and Patient Health Outcomes: The Case of Heart Attacks," NBER Working Papers 21218, National Bureau of Economic Research, Inc.
    5. Joseph J. Doyle Jr. & John A. Graves & Jonathan Gruber & Samuel A. Kleiner, 2015. "Measuring Returns to Hospital Care: Evidence from Ambulance Referral Patterns," Journal of Political Economy, University of Chicago Press, vol. 123(1), pages 170-214.
    6. Clemens, Jeffrey, 2014. "Implications of Physician Ethics, Billing Norms, and Service Cost Structures for Medicare's Fee Schedule," MPRA Paper 73392, University Library of Munich, Germany.
    7. Berndt, Ernst R. & Gibbons, Robert S. & Kolotilin, Anton & Taub, Anna Levine, 2015. "The heterogeneity of concentrated prescribing behavior: Theory and evidence from antipsychotics," Journal of Health Economics, Elsevier, vol. 40(C), pages 26-39.
    8. Cooper, Zack & Kowalski, Amanda & Neff Powell, Eleanor & Wu, Jennifer, "undated". "Politics, hospital behaviour and health care spending," LSE Research Online Documents on Economics 86620, London School of Economics and Political Science, LSE Library.
    9. Zack Cooper & Amanda E. Kowalski & Eleanor Neff Powell & Jennifer Wu, 2017. "Politics, Hospital Behavior, and Health Care Spending Effect Methods to Examine Treatment Effect Heterogeneity in Experiments for the Young and Privately Insured?," Cowles Foundation Discussion Papers 3006, Cowles Foundation for Research in Economics, Yale University.
    10. Zack Cooper & Amanda E. Kowalski & Eleanor Neff Powell & Jennifer Wu, 2017. "Politics, Hospital Behavior, and Health Care Spending," Cowles Foundation Discussion Papers 2106, Cowles Foundation for Research in Economics, Yale University.

    More about this item

    JEL classification:

    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I1 - Health, Education, and Welfare - - Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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