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


ABSTRACT: 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 it 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 3 percent increase in care provision. Elective procedures such as cataract surgery respond much more strongly than less discretionary services. Non-radiologists expand their provision of MRIs, suggesting effects on technology adoption. We estimate economically small health impacts, albeit with limited precision.

SUBMITTER: Clemens J 

PROVIDER: S-EPMC4144420 | biostudies-literature | 2014 Apr

REPOSITORIES: biostudies-literature

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

Clemens Jeffrey J   Gottlieb Joshua D JD  

The American economic review 20140401 4


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 it 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 3 percent increase in care provision. Elective procedures such as catarac  ...[more]

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