TY - JOUR AU - Howard, David H AU - Hockenberry, Jason AU - David, Guy TI - Personalized Medicine When Physicians Induce Demand JF - National Bureau of Economic Research Working Paper Series VL - No. 24054 PY - 2017 Y2 - November 2017 DO - 10.3386/w24054 UR - http://www.nber.org/papers/w24054 L1 - http://www.nber.org/papers/w24054.pdf N1 - Author contact info: David H. Howard Department of Health Policy and Management Emory University 1518 Clifton Road NE Atlanta, GA 30322 Tel: 404-727-3907 Fax: 404-727-9198 E-Mail: dhhowar@emory.edu Jason Hockenberry Yale School of Public Health 60 College St. New Haven, CT 06510 E-Mail: jason.hockenberry@yale.edu Guy David The Wharton School University of Pennsylvania 305 Colonial Penn Center 3641 Locust Walk Philadelphia, PA 19104-6218 Tel: 215/573-5780 Fax: 215/573-2157 E-Mail: gdavid2@wharton.upenn.edu M1 - published as David H. Howard, Jason Hockenberry, Guy David. "Physicians’ Financial Incentives to Personalize Medicine," in Ernst R. Berndt, Dana P. Goldman, and John W. Rowe, editor, "Economic Dimensions of Personalized and Precision Medicine" University of Chicago Press (2019) M3 - presented at "Economic Dimensions of Personalized and Precision Medicine", September 13-14, 2017 AB - Advocates for “personalized medicine” tests claim they can reduce health care spending by identifying patients unlikely to benefit from costly treatments. But most tests are imperfect, and so physicians have considerable discretion in how they use the results. We show that when physicians face incentives to provide a treatment, the introduction of an imperfect prognostic test will increase treatment rates. We study the interaction of incentives and information in physicians’ choice between conventional radiotherapy and intensity modulated radiation therapy (IMRT) for Medicare patients with breast cancer. IMRT is far more costly. Patients with left-side tumors are more likely to benefit from IMRT, though it is unnecessary for the vast majority of patients. IMRT use is 18 percentage points higher in freestanding clinics, where physician-owners share in the lucrative fees generated by IMRT, than in hospital-based clinics. Patients with left-side tumors are more likely to receive IMRT in both types of clinics. However, IMRT use in patients with right-side tumors (the low benefit group) treated in freestanding clinics is actually higher than use in patients with left-side tumors (high benefit group) treated in hospital-based clinics. Prognostic information affects use but does nothing to counter incentives to overuse IMRT. ER -