Empiric examination of physician behavior in a changing healthcare market

We hypothesized that, in the current healthcare environment, medical providers have strong economic incentives to introduce new technology and treat patients more extensively. We examined physician reimbursement for medical procedures in Utah in the early 1990s, a period of increasing utilization of managed care methods, using a cross-section time series and a supply side model to analyze how physician behavior changed during this period of time. Our findings suggest that physicians have acted to maintain their revenue by requesting reimbursement for more procedures as the reimbursement level per procedure decreased. We conclude that increased volatility in reimbursement levels and increased adjudication pressure from payers provide signals to physicians to act strategically to protect their revenue stream.