How do physicians respond to financial incentives? Evidence from a natural experiment in Germany.

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This project addresses the question how physicians respond to financial incentives. Do physicians alter the number of admissions, intensity of care, or quality of care in response to less remunerative reimbursements? Our study aims at identifying as well as quantifying the causal link between reimbursements and physician behavior.To give sound recommendations to policy-makers, it is of vital importance to isolate the causal relationship between reimbursements and physician behavior from other confounding factors. This project innovatively utilizes a natural experiment that took place in Germany in 2005 using modern econometrics.The introduction of the EBM 2000plus (reimbursement schedule for external specialists) on April 1, 2005 is usually regarded as a political faux pas that led to unintended reimbursement cuts for external specialists, particularly in the South of Germany. Only external specialists with a hospital affiliation (treatment group) got hurt by plausibly exogenous payment cuts of up to 50 percent. The reimbursement schedule for hospital specialists (control group) did not change in the period under investigation.Policy-makers design and structure the health care system. To do so, politicians need to know whether and how they can steer the behavior of agents in the health care system (e.g. physicians). An optimal institutional design demands a thorough understanding and empirical estimate of the behavioral responses of the agents in the health care sector.