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Do doctors perform so many tests because they can increase their revenues; are taking...

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sj83 | Valedictorian

Posted May 27, 2013 at 4:06 PM via web

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Do doctors perform so many tests because they can increase their revenues; are taking precautions because of malpractice concerns; or just "doing the job right?"

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted May 27, 2013 at 4:22 PM (Answer #1)

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It is not possible to know what combination of motives each doctor has for ordering the number of tests that they do.  It may even be the case that doctors themselves do not know what is truly driving their decision making.  All we can really say is that economic incentives will have an impact on how many tests doctors order.

It is surely true that essentially every doctor in the United States wants to “do the job right.”  Most doctors would say that this desire drives all of their actions.  However, the basic laws of economics tell us that the way tests are paid for and the possibility of malpractice suits both will tend to increase the number of tests that are ordered.

Our health care system, in general, works on a fee-for-service basis.  That is, each test (in this case) that is ordered by a doctor is paid for by the insurance company.  This means that doctors have an incentive to order more tests in the knowledge that this will increase their revenues.  This is simple supply and demand analysis.  We also know that doctors will desire to avoid lawsuits.  They will want to take actions that will reduce their risk of being held liable for damages in a malpractice suit.  In short, doctors have two major tangible incentives to order more tests.  Even if they are trying their best to “do the job right,” these incentives will color the decisions they make as they try to do so.  These incentives will encourage them to order more tests than they otherwise would.

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