Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 15/2015: Do Treatment Decisions Depend on Physicians’ Financial Incentives?

Kurt R. Brekke (), Tor Helge Holmås (), Karin Monstad () and Odd Rune Straume ()
Additional contact information
Kurt R. Brekke: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway
Tor Helge Holmås: Uni Rokkan Centre and Health Economics Bergen (HEB), Postal: Uni Rokkan Centre, Nygårdsgaten 5 , N-5015 Bergen, Norway
Karin Monstad: Uni Rokkan Centre and Health Economics Bergen (HEB), Postal: Uni Rokkan Centre, Nygårdsgaten 5, N-5015 Bergen, Norway
Odd Rune Straume: University of Minho, Postal: University of Minho, Campus de Gualtar, 4710-057 Braga, Portugal

Abstract: We study whether and how physicians respond to …nancial 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 fi…xed effect model focusing on a narrow time window around the date of specialist certi…cation. Our results show a Sharp response by the GPs immediately after obtaining specialist certi…cation and thus a higher consultation fee: the number of visits increase, while the treatment intensity (prolonged consultations, lab tests, medical procedures) decline. These …ndings are consistent with a theory model where (partly) pro…t-motivated GPs face excess demand and income effects are su¢ ciently small. Finally, we …nd no evidence for adverse health e¤ects (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; Pro…t-motivation.

JEL-codes: H42; H51; I11; I18

30 pages, July 5, 2015

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