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The effect of reimbursement on medical decision making: Do physicians alter treatment in response to a managed care incentive?

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  • Melichar, Lori
Abstract
The empirical literature that explores whether physicians respond to financial incentives has not definitively answered the question of whether physicians alter their treatment behavior at the margin. Previous research has not been able to distinguish that part of a physician response that uniformly alters treatment of all patients under a physician's care from that which affects some, but not all of a physician's patients. To explore physicians' marginal responses to financial incentives while accounting for the selection of physicians into different financial arrangements where others could not, I use data from a survey of physician visits to isolate the effect that capitation, a form of reimbursement wherein physicians receive zero marginal revenue for a range of physician provided services, has on the care provided by a physician. Fixed effects regression results reveal that physicians spend less time with their capitated patients than with their non-capitated patients.

Suggested Citation

  • Melichar, Lori, 2009. "The effect of reimbursement on medical decision making: Do physicians alter treatment in response to a managed care incentive?," Journal of Health Economics, Elsevier, vol. 28(4), pages 902-907, July.
    • Handle: RePEc:eee:jhecon:v:28:y:2009:i:4:p:902-907
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    References listed on IDEAS

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    1. Marsha Gold, "undated". "The Changing US Health Care System: Challenges for Responsible Public Policy," Mathematica Policy Research Reports af2babf768db47e4a727cd7da, Mathematica Policy Research.
    2. Glied, Sherry & Zivin, Joshua Graff, 2002. "How do doctors behave when some (but not all) of their patients are in managed care?," Journal of Health Economics, Elsevier, vol. 21(2), pages 337-353, March.
    3. repec:mpr:mprres:1939 is not listed on IDEAS
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    Cited by:

    1. Cox, James C. & Sadiraj, Vjollca & Schnier, Kurt E. & Sweeney, John F., 2016. "Incentivizing cost-effective reductions in hospital readmission rates," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PB), pages 24-35.
    2. Claudia Keser & Claude Montmarquette & Martin Schmidt & Cornelius Schnitzler, 2020. "Custom-made health-care: an experimental investigation," Health Economics Review, Springer, vol. 10(1), pages 1-12, December.
    3. Alexander Ahammer & Ivan Zilic, 2017. "Do Financial Incentives Alter Physician Prescription Behavior? Evidence from Random Patient-GP Allocations," Working Papers 1701, The Institute of Economics, Zagreb.
    4. Tor Iversen & Hilde Lurås, 2012. "Capitation and Incentives in Primary Care," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 26, Edward Elgar Publishing.
    5. Panthöfer, Sebastian, 2016. "Tort Reform and the Length of Physician Office Visits," UC3M Working papers. Economics 23861, Universidad Carlos III de Madrid. Departamento de Economía.
    6. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
    7. Somi Shin, 2021. "Healthcare provider response to payment system reform: evidence from New Zealand," SN Business & Economics, Springer, vol. 1(11), pages 1-29, November.
    8. Quentin, Wilm & Geissler, Alexander & Wittenbecher, Friedrich & Ballinger, Geoff & Berenson, Robert & Bloor, Karen & Forgione, Dana A. & Köpf, Peer & Kroneman, Madelon & Serden, Lisbeth & Suarez, Raúl, 2018. "Paying hospital specialists: Experiences and lessons from eight high-income countries," Health Policy, Elsevier, vol. 122(5), pages 473-484.
    9. Elena Falcettoni, 2020. "The Consequences of Medicare Pricing: An Explanation of Treatment Choice," Finance and Economics Discussion Series 2020-063, Board of Governors of the Federal Reserve System (U.S.).
    10. Dominic Coey, 2013. "Physician Incentives and Treatment Choices in Heart Attack Management," Discussion Papers 12-027, Stanford Institute for Economic Policy Research.
    11. Bhatia, M. & Dwivedi, L.K. & Banerjee, K. & Dixit, P., 2020. "An epidemic of avoidable caesarean deliveries in the private sector in India: Is physician-induced demand at play?," Social Science & Medicine, Elsevier, vol. 265(C).
    12. Elizabeth L. Munnich & Michael R. Richards, 2020. "Treatment flows after outsourcing public insurance provision: Evidence from Florida Medicaid," Health Economics, John Wiley & Sons, Ltd., vol. 29(11), pages 1343-1363, November.
    13. Yuda, Michio, 2013. "Medical Fee Reforms, Changes In Medical Supply Densities, And Supplier-Induced Demand: Empirical Evidence From Japan," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(1), pages 79-93, June.

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