How do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs

Diane Alexander

No WP-2017-9, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: Billions of dollars have been spent on pilot programs searching for ways to reduce healthcare costs. I study one such program, where hospitals pay doctors bonuses for reducing the total hospital costs of admitted Medicare patients (a ?bundled payment?). Doctors respond to the bonuses by becoming more likely to admit patients whose treatment can generate high bonuses, and sorting healthier patients into participating hospitals. Conditional on patient health, however, doctors do not reduce costs or change procedure use. These results highlight the ability of doctors to game incentive schemes, and the risks of basing nationwide healthcare reforms on pilot programs.

Keywords: Health care reform; Medicare (search for similar items in EconPapers)
JEL-codes: I10 I11 I13 I18 (search for similar items in EconPapers)
Pages: 72 pages
Date: 2017-03-09
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (3)

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Journal Article: How Do Doctors Respond to Incentives? Unintended Consequences of Paying Doctors to Reduce Costs (2020)
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