A Quantitative Observational Study of Physician Influence on Hospital Costs

Physicians serve as the nexus of treatment decision-making in hospitalized patients; however, little empirical evidence describes the influence of individual physicians on hospital costs. In this study, we examine the extent to which hospital costs vary across physicians and physician characteristics. We used all-payer data from 2 states representing 15 237 physicians and 2.5 million hospital visits. Regression analysis and propensity score matching were used to understand the role of observable provider characteristics on hospital costs controlling for patient demographics, socioeconomic characteristics, clinical risk, and hospital characteristics. We used hierarchical models to estimate the amount of variation attributable to physicians. We found that the average cost of hospital inpatient stays registered to female physicians was consistently lower across all empirical specifications when compared with male physicians. We also found a negative association between physicians' years of experience and the average costs. The average cost of hospital inpatient stays registered to foreign-trained physicians was lower than US-trained physicians. We observed sizable variation in average costs of hospital inpatient stays across medical specialties. In addition, we used hierarchical methods and estimated the amount of remaining variation attributable to physicians and found that it was nonnegligible (intraclass correlation coefficient [ICC]: 0.33 in the full sample). Historically, most physicians have been reimbursed separately from hospitals, and our study shows that physicians play a role in influencing hospital costs. Future policies and practices should acknowledge these important dependencies. This study lends further support for alignment of physician and hospital incentives to control costs and improve outcomes.