Physician Agency Research Articles

A structural analysis of physician agency and pharmaceutical demand.

This paper examines the significance of physician agency in medical providers' prescription choices. Physician agency is considered as medical providers' responses to the price and markup percentage of prescription drugs. Their preferences are allowed to be heterogeneous using a random coefficient logit model. Using a sample of anti-diabetic prescriptions with metformin from a population-based database in Taiwan, empirical results reveal that physician owners, privately-owned medical providers, small medical providers and the medical providers facing less competition are more likely to prescribe drugs with higher profit margins. The aggregate pharmaceutical demand is also found to increase with the markup, which is allowed to be endogenous in the estimation. Price elasticity estimates suggest medical providers are quite responsive to pharmaceutical price changes in Taiwan. Counterfactual analysis reveals the potential impact of physician agency is economically significant. Removing markups and lowering pharmaceutical prices are found to be more welfare enhancing than restricting physicians' dispensing services.

Exploring physician agency under demand-side cost sharing-An experimental approach.

The assumption of patient‐regarding physicians has been widely adopted in the health economics literature. Physicians' patient‐regarding preferences are often described as the concern for the health benefits of medical treatments, and thus closely related to the norms and ethics of the medical profession. In this paper, we ask whether physicians' patient‐regarding preferences include a concern for their patient's consumption opportunities alongside patient's health benefits. To identify and quantify physicians' preferences, we design and conduct an incentivized laboratory experiment where choices determine separately the health benefits and the consumption opportunities of a real patient admitted to the nearest hospital. We find strong evidence that future physicians care about their patients' consumption opportunities.

Informal payments and patients’ perceptions of the physician agency problem: Evidence from rural China

Informal payment for medical services is a common phenomenon in China. Patients make informal payments, in cash or in kind, to physicians in addition to official charges billed for medical services. This paper assesses the associations between patients' perceptions of the physician as an agent for the patient's interests (physician agency problem) and informal payment behavior. Using data of 24,000 and 6700 rural households respectively from the Health Development of Rural China Program database (collected in 2008) and Ningxia data source (collected in 2015), we find that patients' concern about physician agency problems is significantly associated with informal payments. The data shows that patients are more likely to make informal payments when they show low trust towards their physicians. For example, in the surgical cases, among patients who strongly distrusted the physicians, 17.9% (95% confidence interval [CI]:]: 13.5, 22.3) initiated informal payments, compared to 8.0% (95% CI: 5.1, 10.9) who expressed “strong trust” in their physicians. Poor communication was also significantly associated with an increase in the informal payment rate. For example, in the non-surgical setting, among the patients who rated the physicians' explaining skills as “poor,” 5.9% (95% CI: 5.0, 6.9) of them made informal payments, significantly higher than the patients who rated “excellent” (of whom 1.8% made informal payments 95% CI, 0.9, 2.7). In this study, we provide an explanation for this finding: patients may initiate informal payments to physicians in order to mitigate the physician agency problem. It suggests that to mitigate informal payments, improving alignment between doctors' incentives and patients' interests would be essential.

Physician agency, consumerism, and the consumption of lower-limb MRI scans

We study where privately insured individuals receive planned MRI scans. Despite significant out-of-pocket costs for this undifferentiated service, privately insured patients often receive care in high-priced locations when lower priced options were available. The median patient in our data has 16 MRI providers within a 30-minute drive of her home. On average, patients bypass 6 lower-priced providers between their homes and their actual treatment locations. Referring physicians heavily influence where patients receive care. The share of the variance in the prices of patients’ MRI scans that referrer fixed effects (52 percent) explain is dramatically greater than the share explained by patient cost-sharing (< 1 percent), patient characteristics (< 1 percent), or patients’ home HRR fixed effects (2 percent). In order to access lower cost providers, patients must generally diverge from physicians’ established referral patterns.

Professionalism Revealed: Rethinking Quality Improvement in the Wake of a Pandemic

Summary The pace of health care quality improvement in the United States has been slow. After 2 decades of efforts relying largely on quality measurement and performance-linked payment incentives, we need new ideas and new conversations. As revealed by health care workers’ response to the Covid-19 pandemic, professionalism in health care may be an underused resource. Reframing quality improvement around the linchpin of care delivery — physician agency — could provide much-needed direction by elucidating strategies that address problems of information or motivation when professionals act as agents on their patients’ behalf. These strategies need not rely on measures. Physicians’ collective ability to observe and learn can be better tapped and their intrinsic motivation better supported. This article discusses the inherent limitations of measure-focused approaches, provides a framework for conceiving a next generation of initiatives that aim to improve care by more productively leveraging professionalism, and offers specific directions for policy and practice.

An Exploration of Knowledge and Attitudes of Medical Students and Rheumatologists to Placebo and Nocebo Effects: Threshold Concepts in Clinical Practice.

Introduction:Understanding placebo and nocebo responses (context/meaning effects [CMEs]) is fundamental to physician agency. Specific instruction in CMEs is often lacking in medical education. Patient–practitioner interactions may challenge medical students’ understanding of biomedical causality and the nexus between this, practical ethics and professionalism across various conceptual and applied aspects of CMEs. This study compared the corpus of knowledge and phronesis related to CMEs between Australian graduate medical students and rheumatologists to gain a sophisticated understanding of this relationship to inform curriculum development.Method:In 2013 and 2014, the authors surveyed third-year medical students undertaking a graduate programme in an Australian medical school and Australian rheumatologists to ascertain their understanding of placebo and nocebo responses. The survey ascertained (1) the alignment of the respondents’ understanding of CMEs with accepted facts and concepts; (2) opinions on the ethical status of CMEs; and (3) responses to 2 scenarios designed to explore matters of biomedical causality, practical ethics and professionalism.Results:There were 88 completed surveys returned, 53 rheumatologists and 35 students. Similar proportions within each group identified CMEs, with most (n = 79/88 [89.8%]) correctly recognising a placebo (rheumatologists: 50 [94.3%], students: 29 [82.9%]) and approximately three-quarters (n = 65/88 [73.9%]) correctly recognising nocebo effects (rheumatologists: 39 [73.6%], students: 26 [74.3%]). Statistically significant differences between practitioners and students were observed in relation to the following: placebo responders and placebo responsiveness; placebos as a ‘diagnostic tool’; placebos usage in clinical practice and research, and nocebo effects.Conclusions:Physicians require an awareness of CMEs and the fact that they arise from and influence the effective agency of health care professionals. Curricular emphasis is needed to permit an honest assessment of the components that influence when, how and why patient outcomes arise, and how one’s agency might have neutral or negative effects but could be inclined towards positive and away from negative patient outcomes.

Optimal Contracting with Altruistic Agents: A Structural Model of Medicare Payments for Dialysis Drugs

We study physician agency and optimal payment policy in the context of an expensive medication used in dialysis care. Using Medicare claims data we estimate a structural model of treatment decisions, in which physicians differ in their altruism and marginal costs, and this heterogeneity is unobservable to the government. In a novel application of nonlinear pricing methods, we theoretically characterize the optimal unrestricted contract in this screening environment with multidimensional heterogeneity. We combine these results with the estimated model to construct the optimal contract and simulate counterfactual outcomes. The optimal contract is a flexible fee-for-service contract, which pays for reported treatments but uses variable marginal payments instead of constant reimbursement rates, resulting in substantial health improvements and reductions in costs. Our structural approach also yields important qualitative findings, such as rejecting the optimality of any linear contract, and may be employed more broadly to analyze a variety of applications. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Family Physician Contract Services and Impacts in China Based on Physician Agency Theory

Family Physician Contract Services and Impacts in China Based on Physician Agency Theory

Physician agency in China: Evidence from a drug-percentage incentive scheme

This paper examines how physicians respond to financial incentives in China. Faced with the requirement to lower drug expenditure as a percentage of the total medical expenditure, physicians increased non-drug expenditure in addition to decreasing drug expenditure, keeping the total expenditure at the historical level. This shift in the expenditure mix was observed only among insured patients, highlighting the role of patient insurance status in affecting the extent to which physician agency drives medical decision making.

Establishing Appropriate Agency Relationships for Providers in China.

Physicians play multiple roles in a health system. They typically serve simultaneously as the agent for patients, for insurers, for their own medical practices, and for the hospital facilities where they practice. Theoretical and empirical results have demonstrated that financial relations among these different stakeholders can affect clinical outcomes as well as the efficiency and quality of care. What are the physicians’ roles as the agents of Chinese patients? The marketization approach of China’s economic reforms since 1978 has made hospitals and physicians profit-driven. Such profit-driven behavior and the financial tie between hospitals and physicians have in turn made physicians more the agents of hospitals rather than of their patients. While this commentary acknowledges physicians’ ethics and their dedication to their patients, it argues that the current physician agency relation in China has created barriers to achieving some of the central goals of current provider-side health care reform efforts. In addition to eliminating existing perverse financial incentives for both hospitals and physicians, the need for which is already agreed upon by numerous scholars, we argue that the success of the ongoing Chinese public hospital reform and of overall health care reform also relies on establishing appropriate physician-hospital agency relations. This commentary proposes 2 essential steps to establish such physician-hospital agency relations: (1) minimize financial ties between senior physicians and tertiary-level public hospitals by establishing a separate reimbursement system for senior physicians, and (2) establishing a comprehensive physician professionalism system underwritten by the Chinese government, professional physician associations, and major health care facilities as well as by physician leadership representatives. Neither of these suggestions is addressed adequately in current health care reform activities.

Patient Copayments, Provider Incentives and Income Effects: Theory and Evidence from the Essential Medications List under China's 2009 Healthcare Reform.

Expanding access through insurance expansion can increase healthcare utilization through moral hazard. Reforming provider incentives to introduce more supply-side cost sharing is increasingly viewed as crucial for affordable, sustainable access. Using both difference-in-differences and segmented regression analyses on a panel of 1,466 hypertensive and diabetic patients, we empirically examine Shandong province's initial implementation of China's 2009 Essential Medications List policy. The policy reduced drug sale markups to providers but also increased drug coverage benefits for patients. We find that providers appeared to compensate for lost drug revenues by increasing office visits, for which no fee reduction occurred. At the same time, physician agency (yielding to patient demand for pharmaceuticals) may have tempered provider incentives to reduce drug expenditures at the visit level. Taken together, the policy may have increased total spending or total out-of-pocket expenditures. Mandating payment reductions in a service that comprises a large portion of provider income may have unintended consequences.

Physician agency and patient survival

We investigate the role of physician agency in determining health care supply and patient outcomes. We show that an increase in health care supply due to a change in private physician incentives has a theoretically ambiguous impact on patient welfare. The increase can reflect either induced demand for ineffective care or a reduction in prior rationing of effective care. Furthermore, physician market structure matters in determining the welfare effects of changes in private physician incentives. We then analyze a change to Medicare fees that caused physicians to increase their provision of chemotherapy. We find that this increase in treatment improved patient survival, extending median life expectancy for lung cancer patients by about 18%. Consistent with the model, we find that while the treatment response was larger in less concentrated markets, survival improvements were larger in more concentrated markets.

A Difference in Copayment and the Physician Agency Problem: Empirical Evidence from Japan

I use two nationally representative sets of medical claim data from the Ministry of Health, Labour, and Welfare in Japan to examine how medical assistance system assignment affects beneficiary utilization of short-term inpatient health care. Since assignment of public assistance by local government is not random but is subject to means testing, I estimate instrumental variable models to control for this endogeneity. I find that monthly medical expenditure is significantly higher for medical assistance patients than that for universal public health insurance patients, but its implied price elasticity ranges from -0.158 to -0.081, which is equivalent to or slightly lower than the elasticity for the RAND health insurance experiment and for the recent Japanese studies. If the effect of patients with high medical expenditure is excluded, the price elasticity becomes more inelastic. However, there is no significant difference in length of hospital stay between medical assistance and health insurance patients. These findings imply that the medical assistance patients are provided with more intensive inpatient treatments than health insurance patients during short-term hospitalization.

Professional norms and physician behavior: Homo oeconomicus or homo hippocraticus?

Physicians' treatment decisions determine the level of health care spending to a large extent. The analysis of physician agency describes how doctors trade off their own and their patients' benefits, with a third party (such as the collective of insured individuals or the taxpayers) bearing the costs. Professional norms are viewed as restraining physicians' self-interest and as introducing altruism towards the patient. We present a controlled experiment that analyzes the impact of professional norms on prospective physicians' trade-offs between their own profits, the patients' benefits, and the payers' expenses for medical care. Our data support the notion that professional norms derived from the Hippocratic tradition shift weight to the patient in physicians' decisions while decreasing their self-interest and efficiency concerns.

Patient Medication Adherence and Physician Agency Problems

Patient medication adherence is important for health, but its causes are not well-understood. I study an under-explored cause of non-adherence: physician agency problems. Because adherence rates differ across therapeutically similar products, physician prescribing decisions, and agency problems, can influence adherence rates. Using insurance claims data on the initial prescriptions and subsequent adherence choices of half a million patients taking statins, I develop and estimate a dynamic model of physician-patient interactions. Imperfectly altruistic physicians trade-off patient utility against other concerns. Agency problems reduce adherence because they imply that physicians do not prescribe their patients' preferred drug, and patients are more likely to adhere to drugs they prefer. Using the estimated model, I find that eliminating agency problems would raise adhere and reduce drug spending as physicians substitute towards cheaper, higher-quality drugs. Relying on stronger assumptions, I also quantify the impact of agency problems on patient welfare and health.

Physician response to financial incentives when choosing drugs to treat breast cancer

This paper considers physician agency in choosing drugs to treat metastatic breast cancer, a clinical setting in which patients have few protections from physicians' rent seeking. Physicians have explicit financial incentives attached to each potential drug treatment, with profit margins ranging more than a hundred fold. SEER-Medicare claims and Medispan pricing data were formed into a panel of 4,503 patients who were diagnosed with metastatic breast cancer and treated with anti-cancer drugs from 1992 to 2002. We analyzed the effects of product attributes, including profit margin, randomized controlled trial citations, FDA label, generic status, and other covariates on therapy choice. Instruments and drug fixed effects were used to control for omitted variables and possible measurement error associated with margin. We find that increasing physician margin by 10% yields between an 11 and 177% increase in the likelihood of drug choice on average across drugs. Physicians were more likely to use drugs with which they had experience, had more citations, and were FDA-approved to treat breast cancer. Oncologists are susceptible to financial incentives when choosing drugs, though other factors play a large role in their choice of drug.

Health Care Reform and Patients' Trust in Physicians in Urban Beijing

AbstractThe Chinese health care system has experienced profound changes in recent decades, including the retrenchment of government financial support. These changes and their subsequent adverse impacts have prompted the Chinese media and some academics to suggest that patients have a relatively low level of trust in physicians in China today. As the first step in exploring the state of patient trust in physicians in public hospitals in urban China, and its determinants, we conducted a survey of 434 patients from 26 public hospitals in urban Beijing between December 2009 and January 2010. Conducted by the Horizon Research Group, our survey asked the patient respondents how they viewed the physicians they were currently seeing, focusing on the following dimensions of trust: physician agency, technical competence, interpersonal competence, and information provided by physicians. Our survey results show a relatively high level of patients' trust in their physicians. Moreover, our in-patient respondents reported a higher level of trust than out-patient respondents with regard to physician agency, interpersonal competence and information provision. Regression analyses also find that patients' self-reported health status, the level of public hospitals from which they received treatment, the duration of their illness, and the frequency of exposure to negative media reports of physicians and hospitals are important determinants of patients' trust in physicians.

Who Pays? Cost-Sharing, Tradeoffs, and the Physicians’ Role in Decision Making

Who Pays? Cost-Sharing, Tradeoffs, and the Physicians’ Role in Decision Making

Pacemaker deactivation: withdrawal of support or active ending of life?

In spite of ethical analyses assimilating the palliative deactivation of pacemakers to commonly accepted withdrawings of life-sustaining therapy, many clinicians remain ethically uncomfortable with pacemaker deactivation at the end of life. Various reasons have been posited for this discomfort. Some cardiologists have suggested that reluctance to deactivate pacemakers may stem from a sense that the pacemaker has become part of the patient's "self." The authors suggest that Daniel Sulmasy is correct to contend that any such identification of the pacemaker is misguided. The authors argue that clinicians uncomfortable with pacemaker deactivation are nevertheless correct to see it as incompatible with the traditional medical ethics of withdrawal of support. Traditional medical ethics is presently taken by many to sanction pacemaker deactivation when such deactivation honors the patient's right to refuse treatment. The authors suggest that the right to refuse treatment applies to treatments involving ongoing physician agency. This right cannot underwrite patient demands that physicians reverse the effects of treatments previously administered, in which ongoing physician agency is no longer implicated. The permanently indwelling pacemaker is best seen as such a treatment. As such, its deactivation in the pacemaker-dependent patient is best seen not as withdrawal of support but as active ending of life. That being the case, clinicians adhering to the usual ethical analysis of withdrawal of support are correct to be uncomfortable with pacemaker deactivation at the end of life.

Physician Agency and Adoption of Generic Pharmaceuticals

I examine physician agency in healthcare services in the context of the choice between brand-name and generic pharmaceuticals. I examine micro-panel data from Japan, where physicians can legally make profits by prescribing and dispensing drugs. The results indicate that physicians often fail to internalize patient costs, explaining why cheaper generics are infrequently adopted. Doctors respond to markup differentials between the two versions, indicating another agency problem. However, generics’ markup advantages are short-lived, which limits their impact on increasing generic adoption. Additionally, state dependence and heterogeneous doctor preferences affected generics’ adoption. Policy makers can target these factors to improve static efficiency.