Physician practice patterns under hospital rate-setting programs

Earlier studies of hospital rate-setting programs have focused primarily on their ability to contain the growth in hospital utilization and expenditures. While most analysts recognize the central role physicians play in influencing health care utilization and expenditures, regulatory programs have been directed primarily at the hospital. At this time, it is unclear what impact, if any, these programs have had on physicians. Our study presents a preliminary analysis of this issue based on data from 1978 to 1982. When we compared average incomes, fees, and utilization of physician services in states with hospital rate regulations with those in states without such programs, we found significant differences. Average net incomes grew at a 1.9% slower annual rate in states with strict hospital regulatory programs. If hospital regulation is having some impact on physicians, both the physician and hospital sector should be considered when evaluating the ability of these programs to contain health care costs.