Incentivizing Cost Containment in Healthcare

In the context of the rising costs of healthcare, our study seeks to address a key component of input costs in hospital systems: the costs of supplies used in surgical procedures. Physicians are given substantial autonomy in the way they perform medical procedures including the choice of which supplies to use during treatment. This autonomy is an integral part of the organizational design of most hospitals, as it is thought that decentralization puts decision rights in the hands of the most informed agents. However, doctors are not typically incentivized to reduce costs and thus often select expensive supplies even when less expensive options exist. Our project uses several interventions to encourage doctors to select lower cost, but equal quality, supplies. Our interventions include (1) a message containing only information about lower cost alternatives (information-only), (2) information about lower cost alternatives with message indicating that cost savings will be shared with the patient (altruism), (3) information about lower cost alternatives combined with information about how the doctor ranks in terms of their supply costs (social comparison), and (4) information about lower cost alternatives with a message indicating that cost savings will be shared with the doctor and deposited in the departmental budget (financial incentives).

Our treatments are rolled out in a series of emails from each doctor's department head (e.g., surgery department chair or sub-group chair). Our outcomes will measure the doctor's responsiveness to the emails, and whether they click "accept" to the suggested changes. We will subsequently measure total cost supply cost savings realized by our treatments.