Working Paper: NBER ID: w29583
Authors: Alon Bergman; Matthew Grennan; Ashley Swanson
Abstract: We draw upon newly merged administrative data sets to study the relationship between payments from medical technology firms to physicians and medical device procurement by hospitals. These payments (and the interactions that accompany them) may facilitate the transfer of valuable information to and from physicians. However, they may also influence physicians’ preferences, and in turn hospital device procurement, in favor of paying firms. Payments are pervasive: 87 percent of device sales in our sample occurred at a hospital where a relevant physician received a payment from a device firm. Payments are also highly correlated with spending within a firm-hospital pair: event studies suggest that a large positive increase in payments to a given hospital from a given firm ($438 per physician on average, or 112 percent of the mean) is associated with 27 percent higher expenditures on the paying firm’s devices post-event. Finally, we explore how payments mediate the relationship between expertise and device procurement patterns. Hospitals affiliated with the top Academic Medical Centers (AMCs), which plausibly represent an expert benchmark, purchase a different mix of devices than other hospitals, and payments to hospitals outside the top AMCs are correlated with larger deviations from the procurement patterns of top AMC hospitals.
Keywords: medical devices; physician payments; hospital procurement; agency problems; conflicts of interest
JEL Codes: D23; D73; I11; L15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Payments from device firms to physicians (J33) | Increased expenditures on devices from the paying firms (L96) |
| Payments to hospitals outside AMCs (I11) | Larger deviations from procurement patterns of top AMC hospitals (H57) |
| Payments (E42) | Greater deviations from benchmark device mixes (Y10) |