Scandinavian Working Papers in Economics

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

No 2008:13: Decision-making in general practice - the effect of financial incentives on the use of laboratory analyses

Siri Fauli Munkerud ()
Additional contact information
Siri Fauli Munkerud: Norwegian Quality Improvement of Laboratory Services in Primary Care (NOKLUS), Postal: P.O.Box 1152 Sentrum, N-0107 Oslo, Norway,

Abstract: This paper examines the reaction of general practitioners (GPs) to a reform in 2004 in the remuneration system for using laboratory services in general practice. Data from Norway make it possible to distinguish between income motivation and service motivation. The purpose of this paper is to study whether income motivation exists, and if so, the degree of income motivation among general practitioners (GPs) in Norway regarding the use of laboratory services in general practices. We argue that the degree of income motivation among GPs is stronger when the physicians are uncertain about the utility of the laboratory service in question. We have panel data from actual physician-patient encounters in general practices in the years 2001-2004, and use discrete choice analysis and random effects models. Our results indicate that there may be an income motivation among GPs regarding using laboratory services as, after the reform, the GPs chose to use laboratory services less frequently where the fees had been most reduced. In addition, estimation results show that an increase in the fees will lead to a small but significant increase in use. The reform led to minor changes in the use of laboratory analyses in GPs’ offices, and we argue that financial incentives were diluted because they were in conflict with medical recommendations and existing medical practice. The patient’s age has the most influence on GPs’ choice regarding use of laboratory services. The results support the hypothesis that the impact of income increases with increasing uncertainty about diagnosis and treatment. The policy implication of our results is that financial incentives alone are not an effective tool for influencing the use of laboratory services in GPs’ offices.

Keywords: Financial incentives; laboratory analyses; diagnostic uncertainty; medical practice.

JEL-codes: I10

40 pages, June 2, 2009

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