THE EFFECT OF COST SHARING ON THE UTILIZATION OF MEDICAL SERVICES WITHIN EPISODES: PHYSICIAN RESPONSES TO INCREASED PATIENT CHARGES (SEVERITY, SUPPLY-INDUCED DEMAND, HEALTH ECONOMICS, UMWA, PHYSICIAN SUPPLY)

Research suggests that as cost sharing increases, use of health services decreases, but the precise effects of cost sharing on physician practice patterns are still unresolved. Physicians, responding to cost sharing as agents of patients, might prescribe less or less costly treatment. Physicians may also respond to fewer visits by patients, and the incentives created by fee-for-service reimbursement, by increasing the "service intensity" of visits in an effort to maintain their income. The United Mine Workers of America (UMWA) beneficiaries represented a natural experiment since in 1977, miners became subject to cost sharing after 25 years of full, first dollar coverage.; This dissertation analyzes data on miners and a stable comparison group of patients in a large multispecialty group practice before and after the UMWA free coverage period, in order to investigate the effects of cost sharing on physician practice patterns. To separate the effects of shifts in severity of illness from the effects of financial incentives, a measure of disease stage within selected episodes of illness was incorporated in the analysis.; Results from an analysis of 1,089 randomly selected, medically similar episodes of treatment indicated that, as expected, charges and visits per episode fell for miners following cost sharing. However, physician behavior was found to shift components of nonminer utilization in a direction opposite to the independent shift in UMWA patient behavior following cost sharing. Both inpatient and ambulatory charges per episode, as well as length of hospital stay per episode, increased for the nonminer comparison group.; The results suggest that analysis of cost sharing must take into account changes in physician practice patterns across all patients in the practice if that analysis is to provide a complete understanding of the effectiveness of cost sharing as a cost containment policy.