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Do Financial Incentives Alter Physician Prescription Behavior? Evidence From Random Patient-GP Allocations

Author

Listed:
  • Alexander Ahammer
  • Ivan Zilic
Abstract
Do physicians respond to financial incentives? We address this question by analyzing the prescription behavior of physicians who are allowed to dispense drugs themselves through onsite pharmacies. Using administrative data comprising over 16 million drug prescriptions between 2008 and 2012 in Upper Austria, a naïve comparison of raw figures reveals that self-dispensing GPs induce 33.2% higher drug expenses than others. Our identification strategy rests on multiple pillars: First, we use an extensive array of covariates along with multi-dimensional fixed effects which account for patient and GP-level heterogeneity as well as sorting of GPs into onsite pharmacies. Second, we use a novel approach that allows us to restrict our sample to randomly allocated patient-GP matches which rules out endogenous sorting as well as principal-agent bargaining over prescriptions between patients and GPs. Contrary to our descriptive analysis, we find evidence that onsite pharmacies have a small negative effect on prescriptions. Although self-dispensing GPs seem to prescribe sligthly more expensive medication, this effect is absorbed by a much smaller likelihood to

Suggested Citation

  • Alexander Ahammer & Ivan Zilic, 2017. "Do Financial Incentives Alter Physician Prescription Behavior? Evidence From Random Patient-GP Allocations," CDL Aging, Health, Labor working papers 2017-02, The Christian Doppler (CD) Laboratory Aging, Health, and the Labor Market, Johannes Kepler University Linz, Austria.
    • Handle: RePEc:jku:cdlwps:wp1702
    Note: English
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    References listed on IDEAS

    as
    1. Alexander Ahammer, 2016. "How Physicians Affect Patients’ Employment Outcomes Through Deciding on Sick Leave Durations," CDL Aging, Health, Labor working papers 2016-04, The Christian Doppler (CD) Laboratory Aging, Health, and the Labor Market, Johannes Kepler University Linz, Austria.
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      • Josef Zweimüller & Rudolf Winter-Ebmer & Rafael Lalive & Andreas Kuhn & Jean-Philippe Wuellrich & Oliver Ruf & Simon Büchi, 2009. "Austrian Social Security Database," NRN working papers 2009-03, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
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    Cited by:

    1. Rachamin, Yael & Meier, Rahel & Valeri, Fabio & Rosemann, Thomas & Muheim, Leander, 2021. "Physician-dispensing as a determinant of clinical and process measurements in patients at increased cardiovascular risk: A cross-sectional study in Swiss general practice," Health Policy, Elsevier, vol. 125(10), pages 1305-1310.
    2. Stacherl, Barbara & Renner, Anna-Theresa & Weber, Daniela, 2023. "Financial incentives and antibiotic prescribing patterns: Evidence from dispensing physicians in a public healthcare system," Social Science & Medicine, Elsevier, vol. 321(C).

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    More about this item

    Keywords

    Physician dispensing; drug expenses; physician agency; moral hazard;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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