Physicians Treating Physicians: Information and Incentives in Childbirth∗

This paper provides new evidence on the interaction between patient information and physician financial incentives. Using rich microdata on childbirth, we compare the treatment of physicians when they are patients with that of comparable non-physicians. We also determine how the treatment gap varies with providers’ financial incentives by exploiting the presence of HMO-owned hospitals. Consistent with induced demand, physicians are approximately 10 percent less likely to receive a C-section, with only a quarter of this effect attributable to differential sorting. While financial incentives affect the treatment of non-physicians, physician-patients are largely unaffected. Physician also have better health outcomes. ∗This paper has benefited from comments by and discussions with: Doug Almond, Kate Baicker, Charlie Brown, David Card, Joe Doyle, Randy Ellis, Amy Finkelstein, Josh Gottlieb, David Green, Jonathan Ketcham, Patrick Kline, Tom McGuire, Edward Norton, Jeff Smith, Heidi Williams, and participants at ASHE, BU/Harvard/MIT Health Seminar, Chicago-Harris, Michigan, NBER SI: Health Care, Ohio State, RAND, SFU, UBC and Yale. We are grateful to Beate Danielsen for performing the confidential merge, to Louise Hand and Betty Henderson-Sparks for their assistance in accessing the data, and to Daniela Carusi, MD for her clinical expertise. Rehavi gratefully acknowledges funding from CIFAR and the Hampton Fund and thanks the RWJ Scholars program for financial support in the initial stages of this project. Corresponding author: M. Marit Rehavi, 997-1873 East Mall, Vancouver, BC V6T 1Z1, phone: 604-822-5226, email: [email protected].