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

Jeffrey Clemens and Joshua Gottlieb

No 11-017, Discussion Papers from Stanford Institute for Economic Policy Research

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 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.

Date: 2012-07
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Journal Article: Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health? (2014)
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