Changing preferences: An experiment and estimation of market-incentive effects on altruism.

This paper studies how altruistic preferences are changed by markets and incentives. We conduct a laboratory experiment with a within-subject design. Subjects are asked to choose health care qualities for hypothetical patients in monopoly, duopoly, and quadropoly. Prices, costs, and patient benefits are experimental incentive parameters. In monopoly, subjects choose quality by trading off between profits and altruistic patient benefits. In duopoly and quadropoly, subjects play a simultaneous-move game. Uncertain about an opponent's altruism, each subject competes for patients by choosing qualities. Bayes-Nash equilibria describe subjects' quality decisions as functions of altruism. Using a nonparametric method, we estimate the population altruism distributions from Bayes-Nash equilibrium qualities in different markets and incentive configurations. Competition tends to reduce altruism, but duopoly and quadropoly equilibrium qualities are much higher than monopoly. Although markets crowd out altruism, the disciplinary powers of market competition are stronger. Counterfactuals confirm markets change preferences.

Technology adoption by primary care physicians.

We study primary care physicians' prevention and monitoring technology adoption. Physicians' adoption decisions are based on benefits and costs, which depend on payment incentives, educational assistance, and market characteristics. The empirical study uses national Norwegian register and physician claims data between 2009 and 2014. In 2006, a new annual comprehensive checkup for Type 2 diabetic patients was introduced. A physician collects a fee for each checkup. In 2013, an education assistance program was introduced in two Norwegian counties. We estimate adoption decisions by fixed-effect regressions, and two-part and hazard models. We use a difference-in-difference model to estimate the education program impact. Fixed-effect estimations and separate analyses of physicians who have moved between municipalities support a peer effect. The education program has a strongly positive effect, which is positively associated with a physician's number of diabetic patients, and the fraction of physician-adopters in the same market.

Uterus at a price: Disability insurance and hysterectomy.

Taiwanese Labor, Government Employee, and Farmer Insurance programs provide 5 to 6 months of salary to enrollees who undergo hysterectomies or oophorectomies before their 45th birthday. These programs create incentives for more and earlier treatments, referred to as inducement and timing effects. Using National Health Insurance data between 1997 and 2011, we estimate these effects on surgery hazards by difference-in-difference and bunching-smoothing polynomial methods. For Government Employee and Labor Insurance, inducement is 11-12% of all hysterectomies, and timing 20% of inducement. For oophorectomies, both effects are insignificant. Enrollees' behaviors are consistent with rational choices. Each surgery qualifies an enrollee for the same benefit, but oophorectomy has more adverse health consequences than hysterectomy. Induced hysterectomies increase benefit payments and surgical costs, at about the cost of a mammogram and 5 pap smears per enrollee.

Competition, gatekeeping, and health care access.

We study gatekeeping physicians' referrals of patients to specialty care. We derive theoretical results when competition in the physician market intensifies. First, due to competitive pressure, physicians refer patients to specialty care more often. Second, physicians earn more by treating patients themselves, so refer patients to specialty care less often. We assess empirically the overall effect of competition with data from a 2008-2009 Norwegian survey, National Health Insurance Administration, and Statistics Norway. From the data we construct three measures of competition: the number of open primary physician practices with and without population adjustment, and the Herfindahl-Hirschman index. The empirical results suggest that competition has negligible or small positive effects on referrals overall. Our results do not support the policy claim that increasing the number of primary care physicians reduces secondary care.

Immigrants' acculturation and changes in Body Mass Index.

We study Body Mass Index (BMI) changes among immigrants from Iran, Pakistan, Sri Lanka, Turkey, and Vietnam relative to native Norwegians in Oslo. We assess the effect of acculturation on BMI changes. We hypothesize that acculturation reduces the gap of BMIs between natives and immigrants. Acculturation is measured by immigrants' language skills. Our data come from two surveys in Oslo 2000-2002. Weights and heights were measured at the surveys; participants were asked to recall weights when they were 25 years old. Norwegian language skills and socio-economic data were collected. Our findings support our hypothesis. Acculturation, as measured by proficiency in the Norwegian language, has the predicted effects on BMI changes. We do not find any effect of immigrants' time of residency on BMI changes.

Optimal public rationing and price response.

We study optimal public health care rationing and private sector price responses. Consumers differ in their wealth and illness severity (defined as treatment cost). Due to a limited budget, some consumers must be rationed. Rationed consumers may purchase from a monopolistic private market. We consider two information regimes. In the first, the public supplier rations consumers according to their wealth information (means testing). In equilibrium, the public supplier must ration both rich and poor consumers. Rationing some poor consumers implements price reduction in the private market. In the second information regime, the public supplier rations consumers according to consumers' wealth and cost information. In equilibrium, consumers are allocated the good if and only if their costs are below a threshold (cost effectiveness). Rationing based on cost results in higher equilibrium consumer surplus than rationing based on wealth.

Market conditions and general practitioners' referrals.

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 has a higher referral rate. To compete for patients and to retain them, a GP satisfies patients' requests for referrals. Furthermore, a GP who faces a patient shortage will refer more often than a GP who does not. Tests with Norwegian GP radiology referral data support our theory.

Service motives and profit incentives among physicians.

We model physicians as health care professionals who care about their services and monetary rewards. These preferences are heterogeneous. Different physicians trade off the monetary and service motives differently, and therefore respond differently to incentive schemes. Our model is set up for the Norwegian health care system. First, each private practice physician has a patient list, which may have more or less patients than he desires. The physician is paid a fee-for-service reimbursement and a capitation per listed patient. Second, a municipality may obligate the physician to perform 7.5 h/week of community services. Our data are on an unbalanced panel of 435 physicians, with 412 physicians for the year 2002, and 400 for 2004. A physician's amount of gross wealth and gross debt in previous periods are used as proxy for preferences for community service. First, for the current period, accumulated wealth and debt are predetermined. Second, wealth and debt capture lifestyle preferences because they correlate with the planned future income and spending. The main results show that both gross debt and gross wealth have negative effects on physicians' supply of community health services. Gross debt and wealth have no effect on fee-for-service income per listed person in the physician's practice, and positive effects on the total income from fee-for-service. The higher income from fee-for-service is due to a longer patient list. Patient shortage has no significant effect on physicians' supply of community services, a positive effect on the fee-for-service income per listed person, and a negative effect on the total income from fee for service. These results support physician preference heterogeneity.

Financial incentives and gaming in alcohol treatment.

This study looks at the effect of performance-based contracting (PBC) on administrative information misreports in substance abuse treatment in Maine. For about 700 alcohol abuse treatment episodes in the period 1990-1995, we constructed clinician report gaming indicators from two data sets: the Maine Addiction Treatment System (MATS) and medical record abstracts. Gaming, in this study, refers to differences in MATS reports and the medical records for an episode. Under PBC, which was implemented in 1992, a provider's financial reward was positively related to treatment outcomes measured by some reports from MATS. We found that the introduction of PBC increased gaming. The data supported the hypotheses that clinicians overstated patient severity at the beginning of treatment episodes, and understated severity at the end.

Managed care, networks and trends in hospital care for mental health and substance abuse treatment in Massachusetts: 1994-1999.

BACKGROUND: Rates of inpatient care for mental health and substance abuse treatment have been reported to fall after the introduction of managed care, but the actual decline may be overstated. Almost all managed care impact studies are based on pre-post comparisons, which have two drawbacks: secular downward trends may be attributed to a managed care effect and self-selection may exaggerate the impact of managed care. Therefore it is useful to examine long-term population-based trends in use associated with the growth of managed care. AIMS OF STUDY: This paper examines trends in inpatient care for mental health and substance abuse treatment in Massachusetts between 1994 and 1999 by service provider and payer. We analyze how managed care impacts the trends in mental health and substance abuse care. METHODS: We provide an overview of the health market in Massachusetts and compare trends in mental health and substance abuse services with all inpatient services. To analyze the impact of managed care, we compare the per discharge cost of managed care and fee for service plans in Medicare and Medicaid. Finally, we examine the role played by hospital networks in managed care. RESULTS: The reduction in service costs for mental health and substance abuse, about 25% in six years, is mostly due to the decline in the average cost per inpatient episode. This is only slightly greater than the decline in costs for all inpatient care. Managed care has reduced both the quantity (average length of stay) and intensity of health care (expenditure per day). Simulations suggest that the creation of hospital networks by managed care accounts for around 50% of the differential between the average costs of the HMO and FFS sectors. DISCUSSION: We find that the cost reductions in mental health and substance abuse services are larger than for physical health, but not by much. The average length of stay and average day cost is lower for managed care plans than for FFS plans, and much of this difference is attributable to the hospitals managed care plans select to participate in their networks. The data are limited to inpatient discharges from Massachusetts and therefore our conclusions may not be readily extended to other places. Furthermore, our analysis is based on the estimated cost rather than the actual payments to hospitals. IMPLICATION FOR HEALTH CARE PROVISION AND USE: The analysis highlights the importance of hospital selection and networks in affecting the cost of care. IMPLICATIONS FOR HEALTH POLICIES: Contrary to popular belief, the analysis shows that the experience of mental health and substance abuse and non-mental health and substance abuse services is similar. Creation of networks is an important strategy in managed care. IMPLICATIONS FOR FURTHER RESEARCH: This paper provides the groundwork for extending the analysis to areas with market characteristics different to those of Massachusetts. Further research should focus on the long-term trends in health outcomes between managed care and fee for service patients.

Risk selection and matching in performance-based contracting.

This paper examines selection and matching incentives of performance-based contracting (PBC) in a model of patient heterogeneity, provider horizontal differentiation and asymmetric information. Treatment effectiveness is affected by the match between a patient's illness severity and a provider's treatment intensity. Before PBC, a provider's revenue is unrelated to treatment effectiveness; therefore, providers supply treatments even if their treatment intensities do not match with the patients' severities. Under PBC, budget allocation is positively related to treatment performance; patient-provider mismatch is reduced because patients are referred more often. Using data from the state of Maine, we show that PBC leads to more referrals and better match between illness severity and treatment intensity. Moreover, we find that PBC has a positive but insignificant effect on dumping.

Consistency in performance evaluation reports and medical records.

BACKGROUND: In the health care market managed care has become the latest innovation for the delivery of services. For efficient implementation, the managed care organization relies on accurate information. So clinicians are often asked to report on patients before referrals are approved, treatments authorized, or insurance claims processed. What are clinicians responses to solicitation for information by managed care organizations? The existing health literature has already pointed out the importance of provider gaming, sincere reporting, nudging, and dodging the rules. AIMS OF THE STUDY: We assess the consistency of clinicians reports on clients across administrative data and clinical records. METHODS: For about 1,000 alcohol abuse treatment episodes, we compare clinicians reports across two data sets. The first one, the Maine Addiction Treatment System (MATS), was an administrative data set; the state government used it for program performance monitoring and evaluation. The second was a set of medical record abstracts, taken directly from the clinical records of treatment episodes. A clinician s reporting practice exhibits an inconsistency if the information reported in MATS differs from the information reported in the medical record in a statistically significant way. We look for evidence of inconsistencies in five categories: admission alcohol use frequency, discharge alcohol use frequency, termination status, admission employment status, and discharge employment status. Chi-square tests, Kappa statistics, and sensitivity and specificity tests are used for hypothesis testing. Multiple imputation methods are employed to address the problem of missing values in the record abstract data set. RESULTS: For admission and discharge alcohol use frequency measures, we find, respectively, strong and supporting evidence for inconsistencies. We find equally strong evidence for consistency in reports of admission and discharge employment status, and mixed evidence on report consistency on termination status. Patterns of inconsistency may be due to both altruistic and self-interest motives. DISCUSSION AND LIMITATIONS: Payment contracts based on performance may be subject to provider mis-reporting, which could seriously undermine its purpose. However, further analysis is needed to determine how much of the inconsistencies observed are results of clinician gaming in reporting. IMPLICATIONS FOR HEALTH POLICY: Increasing system accountability is becoming more and more important for health care policy makers. Results of this study will lead to a better understanding of physician reporting behavior. IMPLICATIONS FOR FUTURE RESEARCH: Our work in this paper on the data sets confirms the statistical significance of strategic reporting in alcohol addiction treatment. It will be of interest to confirm our finding in other data sets. Our on-going research will model the motives behind strategic reporting. We will hypothesize that both altruistic and financial incentives are present. Our empirical identification strategy will use Maine s Performance-Based Contracting system and client insurance sources to test how these incentives affect the direction of clinician s strategic reporting.