Practice budgets and the patient mix of physicians - The effect of a remuneration system reform on health care utilisation

This study analyses the effect of a change in the remuneration system for physicians on the treatment lengths as measured by the number of doctor visits using data from the German Socio-Economic Panel over the period 1995-2002. Specifically, I analyse the introduction of a remuneration cap (so called practice budgets) for physicians who treat publicly insured patients in 1997. I find evidence that the reform of 1997 did not change the extensive margin of doctor visits but strongly affected the intensive margin. The conditional number of doctor visits among publicly insured decreased while it increased among privately insured. This can be seen as evidence that physicians respond to the change in incentives induced by the reform by altering their patient mix.