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Faulty physician decision making has been blamed for everything from medical errors to excessive procedure use and wasteful spending. Yet medical treatment is often complex, requiring a sequence of decisions that may involve trade offs between selecting the choice with the highest expected value or selecting a choice with higher possible payoffs. We show that the best choice depends on a physician’s diagnostic skill so that the optimal treatment can vary even for identical patients. Bringing the model to patient claims data for depression, we show that doctors who experiment more with drug choice achieve better patient outcomes, except when physician decisions violate professional guidelines for drug choice.