Eat What You Kill: Effects of Individual Physician Billing on Utilization & Mortality

Marginal incentives for salaried physicians are starkly different for salaried physicans compared to the traditional fee-for-service model.  Indeed, leading proposals to improve healthcare efficiency often hinge on moving toward lower-powered incentives for physicians.  Despite the interest, there is relatively little work showing the effects of moving physicians toward these payment models in part due to endogeneity concerns as well as a lack of data on physician compensation.

This paper uses a novel way to identify physicians who bill payers as individuals rather than as part of a group.  We find that individual billing has fallen over time as expected due to consolidation of group practices and growing use of hospitalists employed directly by physicians organizations.  Second, we find that hospitals that experienced the largest declines in individual billing also experience substantially slower utilization growth, despite treating similar patients over time.  This is remarkable given that group payment likely includes largely utilization-based payment.  Last, we find that mortality is not affected by the reduction in utilization, suggesting that organizations are able to trim utilization in ways that do not harm patients.