I examine the importance of cost information in the physician referral process. I partner with a group of physician medical practices — an Independent Practice Association (“IPA”) — to perform a field experiment testing whether providing information on the costliness of specialist physicians to primary care physicians (PCPs) alters the PCPs’ referral behavior. The IPA’s primary care practices were assigned randomly to treatment or control groups, and the treatment group practices were provided a list of average costs for several ophthalmologists that are affiliated with the IPA. Using data collected by the IPA, I compare differences in referral rates to the ophthalmologists of interest between the treatment and control groups. My results suggest that, during the first two months following the distribution of the cost list, the treatment group PCPs reallocated referrals towards the least expensive ophthalmology practice by 112% when the patients were the type where the costs incurred by the IPA for the referral depend on the treatment choices of the specialist. This large effect dissipated significantly, though not completely, over the following four months. For patients where specialist treatment choices have little impact on the costs the IPA incurs for referrals, I find no response to the treatment. This contrast in results suggests that PCP responses were influenced by cost reduction motives.
Friday, May 5, 2017
3:30pm – 5:00pm