Self-referral, Medicare Payment Reform and Efficient Provision of Preventive and Diagnostic Services for Coronary Artery Disease

The study looks into the co-decision-making process between physician and patient of choosing diagnostic medical services, especially the effect of financial incentives physicians face when they are able to provide the diagnostic services ordered. I address the questions in the context of Medicare population with suspected cardiovascular artery disease (CAD).

I propose a two-stage model of providers as imperfect agents of patients to investigate provider's choice regarding preventive care offered to patients. Setting up a model of sequential choices of diagnostic tests and therapeutic plan, the paper examines physician's beliefs and choices in the context of treatment of suspected coronary artery disease. Using Medicare's claims data on patients with potential coronary artery disease, I separately identifies physician’s belief about a patient’s true health conditions and disentangles physician’s financial incentives from medical concerns.

The paper investigates to what extent “self-referral” phenomenon affect physicians' choices and patients' health outcomes. Targeting on Medicare payment reform on self-referral, the paper simulates utilization and welfare outcomes under various potential regulatory changes in Medicare.