Scandinavian Working Papers in Economics

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

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

Tor Iversen () and Albert Ma ()
Additional contact information
Tor Iversen: Institute of Health Management and Health Economics, Postal: P.O. Box 1089 Blindern, NO-0317 Oslo, Norway
Albert Ma: Department of Economics, Boston University, and University of Oslo

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

JEL-codes: C23; H42; I11; I18

31 pages, December 14, 2009

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