Financial incentives and prescribing behavior in primary care
Jason Shafrin
Senior Managing Director, Center for Healthcare Economics & Policy at FTI Consulting; Adjunct Professor, University of Southern California
That is the title of a paper by Bodnar et al. 2023. A summary of this interesting paper is below.
Overview of general practitioners in the UK
Under the English National Health Service (NHS) program,
...patients register with a single general practice that acts as the gatekeeper to most other NHS services, including non-emergency hospital care. Almost all general practices are small businesses owned and run by partnerships of GPs who share profits and losses...
GP drug dispensing
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Most patients who receive a drug prescription from their GP must take it to a community pharmacy in contract with the NHS to have it dispensed. Patients who would have serious difficulty in accessing a pharmacy or who live in an area which has been designated as rural in character and who are more than 1 mile (1.6?km) away from a pharmacy, can ask their general practice to dispense drugs to them.4 The practice decision on whether to dispense is all or nothing: if it agrees to dispense to one eligible patient it must dispense to all eligible patients who request it.
Methods
The authors use 2011-2018 quarterly administrative data on GP practices quarterly panel of GP practices and identify drugs dispensed using 15-digit British National Formulary (BNF) codes. The authors compare how practice characteristics impact whether it decides to be a dispensing practice. The authors also use an entropy balancing approach based on the Hainmueller (2012) paper as implemented in Stata (see Hainmueller and Xu 2013). Entropy balancing "...relies on a maximum entropy reweighting scheme that calibrates unit weights so that the reweighted treatment and control group satisfy a potentially large set of prespecified balance conditions that incorporate information about known sample moments. Entropy balancing thereby exactly adjusts inequalities in representation with respect to the first, second, and possibly higher moments of the covariate distributions. " OLS and 2SLS (using rural status as the instrument) are also considered.
Results
Using this approach, the authors find that:
...physician dispensing increases drug costs per patient by 3.1%, due to more, and more expensive, drugs being prescribed. Reimbursement is partly based on a fixed fee per package dispensed and we find that dispensing practices prescribe smaller packages. As the proportion of the practice population for whom they can dispense increases, dispensing practices behave more like non-dispensing practices.
You can read the full paper here.
With schemes that pay for units of outputs delivered like the NHS model, the concern is typically around supplier induced demand and other forms of gaming as again seen here. As the never ending health system needs compete for the rather finite resources available, more than ever, proactive measures that make these sharp practices nearly impossible are needed. There’s a need to reconsider and rewire the current provider payment mechanisms where there will be no incentive to induce demand or game the system.