Financial incentives and the supply of laboratory tests

This study examined how the number of laboratory tests taken by a sample of Norwegian contract physicians is influenced by their private economy outside of the practice and by changes in remuneration. The data are drawn from 40,000 consultations carried out by 44 contract physicians in 1991-1994. Two factors which led to changes in the level of physicians' income are considered: changes in remuneration for consultations and laboratory tests and changes in interest rates on loans and bank deposits. The effect which changes in interest rates have on physicians' disposable income was calculated using information about their financial assets and debts obtained from tax assessments. The main finding was that changes in private economy and changes in remuneration have no or only a small effect on the number of laboratory tests taken. Our results suggest that fee regulation can be an effective means of controlling physicians' income and therefore government expenditure on primary physician services.