Raising the Stakes: Physician Facility Investments and Provider Agency

Munnich, Elizabeth L.; Richards, Michael R.; Whaley, Christopher M.; Zhao, Xiaoxi

doi:10.1257/aer.20211324

Abstract

Principal-agent problems often extend beyond what can be directly addressed through conventional incentive arrangements. We examine a context where physicians are likely under-incentivized to minimize total medical costs until their private financial interests align with those of patients. Leveraging novel data on physician ownership of ambulatory surgery centers––i.e., same-day facilities– –we show that these equity holdings cause a substitution away from higher cost, rival settings that lowers Medicare spending by 10-40% per physician. We find no clear evidence of perverse behavior following these investments. Instead, our findings demonstrate how entrepreneurial activity can indirectly limit principal-agent problems and improve efficiency.

American Economic Review

Raising the Stakes: Physician Facility Investments and Provider Agency

Abstract

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American Economic Review

Raising the Stakes: Physician Facility Investments and Provider Agency

Abstract

Downloads