The Impact of Incentives on Physician Practices

Una Jónsdóttir, Tinna Laufey Ásgeirsdóttir


Theoretical economics and empirical results indicate that people respond to incentives. However, the magnitude of those responses differs according to behavior and context. We investigated the effect of contracts for ambulatory-care services temporarily in effect at Landspitali - The National University Hospital of Iceland on physicians’ practices. The relative risk of endoscopy referrals was calculated after per-referral compensations were eliminated, versus when they were in effect. The frequency of endoscopies during the years of 2000-2002 was compared to the frequency of endoscopies in the years 2003-2005. Data was collected from the University Hospital at Hringbraut (LSH-Hringbraut) along with the University Hospital in Fossvogur (LSH-Fossvogi). Data was also collected from The Icelandic Health Insurance (Sjúkratryggingar Íslands) on endoscopies preformed at physicians’ private clinics. For comparison, analogous data was collected from Akureyri Hospital where no change in physician compensations occurred over the time period. The results showed a 185% increased chance of referrals to an endoscopy at private physicians’ offices after the contracts on ambulatory care services were eliminated. At the University Hospital however, these chances decreased by 38.2%. The overall relative risk of being referred to an endoscopy in the capital region increased by 3.57% after the contracts were eliminated. The assessed relationship between changes in payment schedules to physicians and the frequency rate of endoscopies is statistically, as well as practically significant.


Payments; Health Care; Incentives; Endoscopies.

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