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Do Treatment Decisions Depend on Physicians’ Financial Incentives?

Author

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  • Brekke, Kurt R.

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Holmås, Tor Helge

    (Uni Rokkan Centre and Health Economics Bergen (HEB))

  • Monstad, Karin

    (Uni Rokkan Centre and Health Economics Bergen (HEB))

  • Straume, Odd Rune

    (University of Minho)

Abstract

We study whether and how physicians respond to …nancial incentives, making use of detailed register data on the health-care services provided to patients by general practitioners (GPs) in Norway over a six-year period (2006-11). To identify GPs’treatment responses, we exploit that specialisation in general medicine entitles the GPs to a higher consultation fee, implying a change in total and relative fee payments. To control for demand and supply factors related to becoming a specialist, we estimate a GP fi…xed effect model focusing on a narrow time window around the date of specialist certi…cation. Our results show a Sharp response by the GPs immediately after obtaining specialist certi…cation and thus a higher consultation fee: the number of visits increase, while the treatment intensity (prolonged consultations, lab tests, medical procedures) decline. These …ndings are consistent with a theory model where (partly) pro…t-motivated GPs face excess demand and income effects are su¢ ciently small. Finally, we …nd no evidence for adverse health e¤ects (measured by emergency care centre visits) on patients due to the change in GPs’ treatment behaviour after becoming a specialist.

Suggested Citation

  • Brekke, Kurt R. & Holmås, Tor Helge & Monstad, Karin & Straume, Odd Rune, 2015. "Do Treatment Decisions Depend on Physicians’ Financial Incentives?," Discussion Paper Series in Economics 15/2015, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2015_015
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    Cited by:

    1. Kurt R. Brekke & Tor Helge Holmäs & Karin Monstad & Odd Rune Straume, 2018. "How does the type of remuneration affect physician behaviour? Fixed salary versus fee-for-service," NIPE Working Papers 09/2018, NIPE - Universidade do Minho.
    2. David Bardey & Philippe de Donder & Vera Zaporozhets, 2024. "Economic Incentives to Develop and to Use Diagnostic Tests - A Literature Review," Working Papers hal-04472497, HAL.
    3. Gabriel A. Facchini Palma, 2020. "Low Staffing in the Maternity Ward: Keep Calm and Call the Surgeon," Working Papers wpdea2009, Department of Applied Economics at Universitat Autonoma of Barcelona.
    4. Kurt R. Brekke & Tor Helge Holmås & Karin Monstad & Odd Rune Straume, 2018. "Socio‐economic status and physicians' treatment decisions," Health Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 77-89, March.
    5. Huitfeldt, Ingrid, 2021. "Hospital reimbursement and capacity constraints: Evidence from orthopedic surgeries," Health Policy, Elsevier, vol. 125(6), pages 732-738.
    6. March, Raymond J. & Geloso, Vincent, 2020. "Gordon Tullock meets Phineas Gage: The political economy of lobotomies in the United States," Research Policy, Elsevier, vol. 49(1).
    7. Carol Propper & George Stoye & Max Warner, 2023. "The effects of pension reforms on physician labour supply: Evidence from the English NHS," IFS Working Papers W23/26, Institute for Fiscal Studies.
    8. Zhang, Xuan, 2022. "The effects of physician retirement on patient outcomes: Anticipation and disruption," Journal of Public Economics, Elsevier, vol. 207(C).
    9. Fengrong Liu & Jiayu Chen & Chaozhu Li & Fenghui Xu, 2023. "Cost Sharing and Cost Shifting Mechanisms under a per Diem Payment System in a County of China," IJERPH, MDPI, vol. 20(3), pages 1-12, January.
    10. Simon Reif & Lucas Hafner & Michael Seebauer, 2020. "Physician Behavior under Prospective Payment Schemes—Evidence from Artefactual Field and Lab Experiments," IJERPH, MDPI, vol. 17(15), pages 1-37, July.
    11. Rong Fu & Yichen Shen & Haruko Noguchi, 2021. "The best of both worlds? The economic effects of a hybrid fee‐for‐service and prospective payment reimbursement system," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 505-524, March.
    12. Calvin Ackley & Abe Dunn & Eli Liebman & Adam Hale Shapiro, 2024. "Are Medicaid and Medicare Patients Treated Equally?," Working Paper Series 2024-14, Federal Reserve Bank of San Francisco.
    13. Facchini, Gabriel, 2022. "Low staffing in the maternity ward: Keep calm and call the surgeon," Journal of Economic Behavior & Organization, Elsevier, vol. 197(C), pages 370-394.
    14. Brekke, Kurt R. & Holmås, Tor Helge & Monstad, Karin & Straume, Odd Rune, 2019. "Competition and physician behaviour: Does the competitive environment affect the propensity to issue sickness certificates?," Journal of Health Economics, Elsevier, vol. 66(C), pages 117-135.
    15. Véra Zabrodina & Mark Dusheiko & Karine Moschetti, 2020. "A moneymaking scan: Dual reimbursement systems and supplier‐induced demand for diagnostic imaging," Health Economics, John Wiley & Sons, Ltd., vol. 29(12), pages 1566-1585, December.
    16. Jamie O’Halloran & Anne Sophie Oxholm & Line Bjørnskov Pedersen & Dorte Gyrd-Hansen, 2021. "Home sweet home: GPs’ response to an increase in the fee size for home visits," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 22(6), pages 977-989, August.
    17. Devlin, Aileen M. & McCormack, Grace, 2023. "Physician responses to Medicare reimbursement rates," Journal of Health Economics, Elsevier, vol. 92(C).

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    More about this item

    Keywords

    General Practitioners; Fee-for-service; Pro…t-motivation.;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and 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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