Physician Practice Setting and the Use of a Low Value Treatment

Physicians’ practice setting moderates the impact of reimbursement on physicians’ financial incentives. Physicians in large, multispecialty organizations may feel less pressure to adopt profitable but unproven treatments. Radiation oncologists practice in hospitals or freestanding radiotherapy clinics. We evaluate the impact of practice setting on the diffusion and use of intensity modulated radiation therapy (IMRT) in breast cancer patients.

IMRT is an alternative to conventional beam radiation. By delivering a more uniform, targeted field of radiation, IMRT has the potential to improve cancer control while reducing damage to healthy tissue. However, these benefits are speculative, and Medicare payments for IMRT are $8,000 higher than for conventional radiotherapy.

Radiation oncologists in independent radiology clinics may face stronger incentives to provide IMRT because they are the residual claimants for the high IMRT technical fees. Counteracting this effect, hospital managers, who are focused on institutional financial performance, may encourage physicians to use well-reimbursed treatments.

Using SEER-Medicare data, we identified women continuously enrolled in fee-for-service Medicare diagnosed with early stage breast cancer between 2001 and 2011 who received lumpectomy (i.e., breast conserving surgery) and post-operative radiotherapy.

10,685 (33%) of 32,695 patients received radiotherapy in independent clinics, and the share was fairly constant over the study period. Beginning in 2002, when Medicare started paying for IMRT, radiation oncologists in independent clinics were much more likely to adopt IMRT. In 2008, 33% of patients treated at independent clinics received IMRT compared to only 13% of patients receiving radiotherapy at hospitals. When we instrument for practice setting with the setting where patients received their lumpectomy (hospital or freestanding surgery center) and control for patient characteristics, we find that patients treated in independent radiology clinics were 11 percentage points more likely to receive IMRT.

Physicians in independent clinics were more likely to adopt a costly but unproven technology. The results suggest a potential upside to vertical integration in healthcare: consolidated providers, by insulating physician-employees from reimbursement incentives, may reduce the use of low value treatments.