Do Treatment Decisions Depend on Physicians` Financial Incentives?

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.