Do Treatment Decisions Depend on Physicians' Financial Incentives?

37 Pages Posted: 20 Aug 2015

See all articles by Kurt Richard Brekke

Kurt Richard Brekke

Norwegian School of Economics (NHH) - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Tor Helge Holmas

University of Bergen - Department of Economics

Karin Monstad

Uni Research AS

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: July 6, 2015

Abstract

We study whether and how physicians respond to financial incentives, making use of detailed register data on the health-care services provided to patients by general practitioners (GPs) in Norway over a six-year period (2006-11). To identify GPs' treatment responses, we exploit that specialisation in general medicine entitles the GPs to a higher consultation fee, implying a change in total and relative fee payments. To control for demand and supply factors related to becoming a specialist, we estimate a GP fixed effect model focusing on a narrow time window around the date of specialist certification. Our results show a Sharp response by the GPs immediately after obtaining specialist certification and thus a higher consultation fee: the number of visits increase, while the treatment intensity (prolonged consultations, lab tests, medical procedures) decline. These findings are consistent with a theory model where (partly) profit-motivated GPs face excess demand and income effects are sufficiently small. Finally, we find no evidence for adverse health effects (measured by emergency care centre visits) on patients due to the change in GPs' treatment behaviour after becoming a specialist.

Keywords: General Practitioners; Fee-for-service; Profit-motivation

JEL Classification: H42; H51; I11; I18

Suggested Citation

Brekke, Kurt Richard and Holmas, Tor Helge and Monstad, Karin and Straume, Odd Rune, Do Treatment Decisions Depend on Physicians' Financial Incentives? (July 6, 2015). NHH Dept. of Economics Discussion Paper No. 15/2015, Available at SSRN: https://ssrn.com/abstract=2647375 or http://dx.doi.org/10.2139/ssrn.2647375

Kurt Richard Brekke (Contact Author)

Norwegian School of Economics (NHH) - Department of Economics ( email )

Helleveien 30
N-5035 Bergen
Norway

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Tor Helge Holmas

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway
+47 55589238 (Phone)
+47 55589210 (Fax)

HOME PAGE: http://www.econ.uib.no/stab/torHelge.html

Karin Monstad

Uni Research AS ( email )

Uni Rokkan Centre
Nygårdsgaten 5
5015 Bergen
Norway

Odd Rune Straume

University of Minho - Economic Policies Research Unit (NIPE) ( email )

Campus de Gualtar
Braga, 4710-057
Portugal

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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