Physician beliefs and patient preferences

There is considerable controversy about the causes of regional variations in health care expenditures. We use vignettes from patient and physician surveys linked to fee-for-service Medicare expenditures to test whether patient demand-side factors or physician supply-side factors explain regional variations in spending. We find patient demand is relatively unimportant in explaining variation in spending after accounting for physician beliefs. Physician organizational factors matter, but the single most important factor is physician beliefs about treatment: 35% of Medicare end-of-life spending, 12% of spending for heart attack patients, and 12% of total Medicare spending are associated with physician beliefs unsupported by clinical evidence.