Physician Reaction to Price Changes: An Episode-of-Care Analysis

Physicians may respond to fee reductions in a variety of ways. This episode-of-care analysis examines the impact of surgical fee reductions (mandated by the Omnibus Budget Reconciliation Acts [OBRAs] of 1986-87) on the overall pattern and cost of health care services provided in association with the surgical procedure itself. The study focuses on six procedure groups: cataract extractions; total hip replacement; total knee replacement; coronary artery bypass graft (CABG) surgery; upper gastrointestinal (GI) endoscopy; and prostatectomy. Only two of these procedures give significant evidence for the existence of a service volume offset to the fee reductions.