(how) does payment disclosure affect physician behavior and patient welfare?

This paper examines how physician behavior and patient welfare are affected by the disclosure of payments to physicians from pharmaceutical manufacturers. The disclosure policy aims to increase transparency and address potential bias in physician’s prescription behavior induced by the payments. While existing studies of the policy restrict to substitution patterns within drug categories, I consider how physicians may choose treatment options beyond medication such as surgery. In addition, I examine how patient welfares are affected accordingly, providing a more comprehensive evaluation of the disclosure policy. Using a patient level dataset of inpatient hospital care from 2006-2010, I compare the experience of heart disease patients in Vermont (a pioneer disclosure state) with that of New Hampshire (a neighbor control state). The difference-in-differences estimates show that payment disclosure leads to higher probabilities of surgery procedures and better health outcomes without significantly higher costs. The findings suggest that the disclosure policy motivates physicians to choose more appropriate treatment options.