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Health Economics Research Programme, University of Oslo HERO On line Working Paper Series

No 2009:8:
Market Conditions and General Practitioners’ Referrals

Tor Iversen () and Albert Ma ()

Abstract: We study how market conditions influence referrals of patients by general practitioners (GPs). We set up a model of GP referral for the Norwegian health care system, where a GP receives capitation payment based on the number of patients in his practice, as well as fee-for-service reimbursements. A GP may accept new patients or close the practice to new patients. We model GPs as partially altruistic, and compete for patients. We show that a GP operating in a more competitive market refers more. To retain patients in his practice, a GP satisfies patients’ requests for referrals. Furthermore, a GP who faces patient shortage will refer more often than a GP who has enough patients. More referrals may add to profits from future treatments. Using data of radiology referrals by GPs in Norway, we test and confirm our theory.

Keywords: Physician; service motive; profit motive; referral; radiology; (follow links to similar papers)

JEL-Codes: C23; H42; I11; I18; (follow links to similar papers)

31 pages, December 14, 2009

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