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International Journal of Health Economics and Management

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Open Access 01-06-2015

The effect of physician remuneration on regional variation in hospital treatments

Authors: Rudy Douven, Remco Mocking, Ilaria Mosca

Published in: International Journal of Health Economics and Management | Issue 2/2015

Abstract

We study medical practice variations for nine hospital treatments in the Netherlands. Our panel data estimations include various control factors and physician’s role to explain hospital treatments in about 3,000 Dutch zip code regions over the period 2006–2009. In particular, we exploit the physicians’ remuneration difference—fee-for-service (FFS) versus salary—to explain the effect of financial incentives on medical production. We find that utilization rates are higher in geographical areas where more patients are treated by physicians that are paid FFS. This effect is strong for supply sensitive treatments, such as cataracts and tonsillectomies, while we do not find an effect for non-supply sensitive treatments, such as hip fractures.

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http://www.dartmouthatlas.org/.

Dutch citizens pay only 5 percent of their health care expenditures out-of-pocket, one of the lowest contributions of EU member states. During the sample period the annual mandatory deductible for basic benefit package was €150 for adults (€0 for children). Adults could choose an additional voluntary deductible up to €500, but only about 5 percent of the population did (NZa 2011).

About 63 percent of the patients in Dutch hospitals are referred by a GP. This figure used to be quite stable but declined to 57.7 percent in 2008 and 60.6 percent in 2009, suggesting that physicians increased the number of referrals to other physicians (or to themselves) within hospitals.

The health care sector in the Netherlands was fundamentally reformed in 2006 with the introduction of regulated competition . The rationale behind the reform is to stimulate efficiency and curb health care costs while safeguarding governmental objectives such as affordability, quality, and accessibility. From 2006–2009 one small insurer started to experiment with selective contracting of hospitals.

Part B was expanded to 70 percent in 2012.

Physicians working at university hospitals are salaried. When it comes to general hospitals, physicians can either receive a salary or FFS.

A DTC can be characterized as a bundle of services. FFS physicians were present during the budgeting system before the year 2000, but this caused tension because the hospital management tried to restrict their activities (Kruijthof 2005).

Although the hospital management may stimulate salaried physicians to increase production, for example by providing bonusses.

The in-patient admission rates increased by more than 3 percent per year from 2001 to 2007, while at the same time day care admissions increased by about 9 percent annually (Vijsel et al. 2011). Prior to 2008 medical specialists received a lump sum (fixed budget) payment in part A of hospital care. In each hospital the lump sum was divided among specialists according to past production and fees. As the lump sum was a fixed amount of money, there were no incentives for specialists to increase the production. The lump sum ceased to exist in 2008. Since then medical specialists face the same financial incentives in part A and part B of hospital care.

DTCs formally have a maximum length of 365 days. For chronic patients DTCs are automatically closed after a one year-period and reopened thereafter. Steinbusch et al. (2007) provide more information about DTCs and their relation to DRGs.

Especially in 2006 and 2008 many hospitals often used the non-existent zip code “1,000” for all treatments. During 2006–2009 36 hospitals had non-existent zip codes for more than 20 percent of their DTCs. Computationally, we followed a similar procedure for all nine treatments and deleted about 400 four-digit zip code areas for which the first two digits were the same as the hospitals’.

The number of inhabitants per four-digit zip code area is obtained from CBS (see “Control variables” section).

The missing values refer to our explanatory variables obtained from CBS (“Control variables” section).

The information is freely available at www.cbs.nl.

Variables directly related to health status are not necessarily preferable in explaining regional variation. Inhabitants are more likely to receive treatment if their physician treats them more intensively. This bias may make patients in high treatment areas appear sicker than they actually are.

Mortality rate can be viewed as an outcome indicator of health care performances. This is however less relevant for our analysis since our treatments are in general not life-threatening. As an extra check we ran all regressions excluding the mortality rate, but this did not influence our results.

For example, if half of the patients in a two-digit area are treated by a university hospitals and the other half by hospitals with only FFS physicians then the FFS- and UH-percentage are both 50 percent and the GH- and UN- percentage are both 0 percent. The average percentages of physicians is also influenced by the fact that in a few number of hospitals the type of renumeration changed during the sample period.

Since \(\sum _\theta p_{\theta ,it}=1\).

The low within variation for UH physicians makes it difficult to identify the impact of the different physician remuneration schemes relative to the base category of UH physicians. Note, however, that we are still able to identify differences between the other types of physicians (GH, FFS, and UN), because within variation is much higher for these types of physicians.

We performed this test with Stata, using the xtoverid command (see Schaffer and Stillman 2010).

Note, that the OLS and RE estimations provide more stable results and confirm our three hypotheses as well.

The marginal effects show the impact on average treatment density. The impact of a 1 percent increase in the percentage of FFS physicians visited and a 1 percent decrease in the percentage of GH physicians visited is a 0.27 percent increase of the average treatment density. Since population stays the same, this is equivalent to a 0.27 percent increase in the number of cataract treatments. The total number of treatment over the period 2006–2009 was just above 580,000 (Tables 1, 2). This would mean that about 1,600 extra cataract treatments would have been performed, if patients had visisted 1 percent more FFS and 1 percent less GH physicians over the period 2006–2009.

Note that the individual coefficients \(\delta _{UN}\) in Table 10 are all positive and significant, except for varicose veins (surgery) and hip fractures, indicating that the number of treatments is on average higher when patients visited relatively more UN physicians compared to UH physicians.

It should be stressed, however, that the incentives for UH and GH physicians are not identical as explained in “Data and descriptive statistics” section.

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Title: The effect of physician remuneration on regional variation in hospital treatments
Authors: Rudy Douven
Remco Mocking
Ilaria Mosca
Publication date: 01-06-2015
Publisher: Springer US
Published in: International Journal of Health Economics and Management / Issue 2/2015
Print ISSN: 2199-9023
Electronic ISSN: 2199-9031
DOI: https://doi.org/10.1007/s10754-015-9164-2

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The effect of physician remuneration on regional variation in hospital treatments

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