How Do Doctors Behave When Some (But Not All) of Their Patients are in Managed Care? Sherry Glied and Joshua Graff Zivin Division of Health Policy and Management

Most physicians today treat a variety of patients within their practices where a variety of insurance arrangements co-exist. In this paper, we propose several theoretical explanations for physician treatment patterns when the patient population is heterogeneous at the practice level. Data from the 1993-1996 National Ambulatory Medical Care Survey (NAMCS) are used to test how practice-level managed care penetration affects treatment intensity. Practice composition has strong effects on treatment. Visit duration appears to be constant across patients within a practice, while tests ordered, medications prescribed, and return visits specified appear to be converging as managed care penetration increases. Overall the data appear to be consistent with a fixed cost hypothesis of treatment in a heterogeneous practice. HMO-dominated practices appear to use a practice style that is quite different from that used in other practices. These findings suggest that practices may become more segregated over time. JEL Classification: I11; D2