Physician Induced Demand

Are physicians willing to perform more invasive procedures if there are financial incentives to do so? A physician usually is better informed about the risks and returns to a procedure than the patient is and can exploit this knowledge. Usually, but not if the patient is also a physician. In a new working paper "Physicians Treating Physicians: Information and Incentives in Childbirth," Rehavi and Johnson compare obstetricians' choice of C-section during childbirth when the expectant mother is herself a medical doctor to when she is not. From their abstract:

... Consistent with PID [Physician Induced Demand], physicians are almost 10 percent less likely to receive a C-section, with only a quarter of this effect attributable to differential sorting of patients to hospitals or obstetricians. Financial incentives have a large effect on C-section probabilities for non-physicians, but physician-patients are relatively unaffected. Physicians also have better health outcomes, suggesting overuse of C-sections adversely impacts patient health.