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Physician Incentives and Treatment Choices in Heart Attack Management

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  • Dominic Coey

    () (Stanford University)

Abstract

We estimate how physicians’ financial incentives affect their treatment choices in heart attack management, using a large dataset of private health insurance claims. Different insurance plans pay physicians different amounts for the same services, generating the required variation in financial incentives. We begin by presenting evidence that, unconditionally, plans that pay physicians more for more invasive treatments are associated with a consider- ably larger fraction of such treatments. To interpret this correlation as causal, we continue by showing that it survives conditioning on a rich set of diagnosis and provider-specific variables. We perform a host of additional checks verifying that differences in unobservable patient or provider characteristics across plans are unlikely to be driving our results. We find that physicians’ treatment choices respond positively to the payments they receive, and that the response is quite large. If physicians received bundled payments instead of fee- for-service incentives, for example, heart attack management would become considerably more conservative. Our estimates imply that 20 percent of patients would receive different treatments, physician costs would decrease by 27 percent, and social welfare would increase.

Suggested Citation

  • Dominic Coey, 2013. "Physician Incentives and Treatment Choices in Heart Attack Management," Discussion Papers 12-027, Stanford Institute for Economic Policy Research.
  • Handle: RePEc:sip:dpaper:12-027
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    File URL: http://www-siepr.stanford.edu/repec/sip/12-027.pdf
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    References listed on IDEAS

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    Cited by:

    1. Diane Alexander, 2017. "How do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs," Working Paper Series WP-2017-9, Federal Reserve Bank of Chicago.
    2. Abe Dunn & Adam Hale Shapiro, 2018. "Physician Competition and the Provision of Care: Evidence from Heart Attacks," American Journal of Health Economics, MIT Press, vol. 4(2), pages 226-261, Spring.
    3. Diane Alexander, 2015. "Does Physician Pay Affect Procedure Choice and Patient Health? Evidence from Medicaid C-section Use," Working Paper Series WP-2017-7, Federal Reserve Bank of Chicago, revised 31 Jul 2015.

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