Economic Factors in the Use of Laboratory Tests by Office-Based Physicians

This report analyzes the effect of economic factors on the frequency, charges, and location of laboratory tests by office-based physicians. Section II develops a formal model of the economic factors affecting physician behavior in prescribing and charging for tests. Section III describes supply conditions in the independent clinical laboratory industry and the effects of regulation. Section IV analyzes the decision to do tests in-house and to adopt semiautomated techniques. The data are described in Sec. V. Section VI presents empirical estimates of determinants of the frequency of tests, the decision to do tests in-house and acquire an autoanalyzer, and the physician's fee for a complete blood count. The findings and policy implications are summarized in Sec. VII. The appendix presents an alternative model in which the office visit fee is proportional to the amount of time spent by the physician.