Does knowing the costs of other physicians affect doctors' referrals?

Area of Science:

• Health economics
• Medical practice management
• Healthcare policy

Background:

• Patient referrals from primary care physicians (PCPs) to specialists are a cornerstone of healthcare delivery in the United States.
• Referral decisions are often made without awareness of the associated costs of specialist care.
• This lack of cost information can lead to suboptimal resource allocation and increased healthcare expenditures.

Purpose of the Study:

• To investigate the impact of providing cost information to PCPs on their specialist referral patterns.
• To determine if financial incentives for PCPs influence their response to cost data.
• To quantify the potential cost savings associated with informed referral decisions.

Main Methods:

• A field experiment was conducted within an Independent Practice Association (IPA).
• Randomly selected primary care medical practices received a list of average costs for new ophthalmology referrals.
• Administrative referral data was analyzed to track changes in referral patterns before and after the intervention.

Main Results:

• PCPs increased referrals to less costly ophthalmology practices by 4.6 percentage points for each rank of cost reduction within the first two months.
• These effects were observed only for patients where PCPs had cost reduction incentives.
• The observed effects on referral patterns dissipated over the subsequent four months.
• For affected patients, the average cost of an ophthalmology referral to the IPA decreased by approximately $80 (45% of the pre-intervention cost).

Conclusions:

• Informing PCPs about specialist costs can effectively steer referrals toward more cost-efficient options.
• Financial incentives are crucial for motivating PCPs to consider cost in their referral decisions.
• This intervention demonstrates a viable strategy for reducing healthcare costs through improved information dissemination and targeted incentives.