TY  - JOUR
AU  - Afendulis,Christopher C.
AU  - Kessler,Daniel P.
TI  - Tradeoffs from Integrating Diagnosis and Treatment in Markets for Health Care
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12623
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12623
L1  - http://www.nber.org/papers/w12623.pdf
N1  - Author contact info:
Christopher Afendulis
Department of Health Care Policy
Harvard Medical School
180 Longwood Avenue
Boston, MA 02115
E-Mail: afendulis@hcp.med.harvard.edu

Daniel Kessler
Hoover Institution
Stanford University
434 Galvez Mall
Stanford, CA  94305
Tel: 650/723-0596
E-Mail: fkessler@stanford.edu
AB  - What are the important tradeoffs in consulting a single expert for both diagnosis and treatment?  On one hand, an integrated diagnostician may have the incentive to recommend treatments that are not in the buyer's best interests.  On the other hand, joint production of diagnosis and treatment by an integrated diagnostician may be more efficient.  We examine an important special case of this problem:  the costs and health outcomes of elderly Medicare beneficiaries with coronary artery disease.  We compare the empirical consequences of diagnosis by an "integrated" cardiologist -- one who can provide surgical treatment -- to the consequences of diagnosis by a non-integrated cardiologist.  Diagnosis by an integrated cardiologist leads, on net, to higher health spending but similar health outcomes.  The net effect contains three components:  reduced spending and improved outcomes from better allocation of patients to surgical treatment options; increased spending conditional on treatment option; and worse outcomes from poorer provision of non-surgical care.  We conclude that accounting more completely for doctors' incentives to refer patients in setting reimbursements, or in the alternative, allowing doctors more freedom to make and receive payments for referrals, could reduce spending and improve quality.
ER  -