American Economic Review: Vol. 104 No. 4 (April 2014)

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

Article Citation

Clemens, Jeffrey, and Joshua D. Gottlieb. 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?" American Economic Review, 104(4): 1320-49.

DOI: 10.1257/aer.104.4.1320

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.

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Online Appendix (401.40 KB) | Download Data Set (128.58 KB) | Author Disclosure Statement(s) (41.55 KB)

Authors

Clemens, Jeffrey (U CA, San Diego)
Gottlieb, Joshua D. (U British Columbia)

JEL Classifications

I11: Analysis of Health Care Markets
I18: Health: Government Policy; Regulation; Public Health
J44: Professional Labor Markets; Occupational Licensing
O32: Management of Technological Innovation and R&D


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