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

  • Jeffrey Clemens

    ()

    (Stanford Institute for Economic Policy Research)

  • Joshua D. Gottlieb

    ()

    (Department of Economics, Harvard University)

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 is 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.

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File URL: http://www-siepr.stanford.edu/repec/sip/11-017.pdf
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Paper provided by Stanford Institute for Economic Policy Research in its series Discussion Papers with number 11-017.

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Date of creation: Jul 2012
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Handle: RePEc:sip:dpaper:11-017
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