Unbiased Analysis of Today's Healthcare Issues

Does patient demand respond to physician quality?

Written By: Jason Shafrin - Sep• 26•17

The answer to this question must be ‘yes’.  Everyone wants to see a good doctor compared to a bad doctor.  However, what defines a “good” doctor?  Patients perception of what makes a doctor good (e.g., bedside manner, clinic amenities) may not correspond to what technocrats or policmakers think (e.g., process of care measures).  Even if patient and payer/policymaker/provider ideas of quality are aligned, non-technical patients may not be good judges of physician quality.

An interesting paper by Fe, Powell-Jackson and Yip (2017) use data from rural China (Ningxia province in Northwest China) to answer this question.

We have sufficiently tight confidence intervals to rule out reasonably small effect sizes. The results…suggest that a one standard deviation increase in doctor competence has an insignificant effect of 1.7 percentage points on the probability of visiting a village doctor, relative to a mean of 18%. The confidence intervals imply that we can rule out a positive effect size of 4.7 percentage points. Taken together, the findings suggest that healthcare-seeking behaviour is unresponsive to changes in doctor competence at the village level.

However, perceptions matter:

A one standard deviation increase in perceptions of quality is associated with 6 percentage point increase in use of village doctors.

Interesting, patient perceptions of value and technical competence are not well correlated.

The obvious conclusion from this paper is that patients do not know anything and top down government programs could solve these problems.  However, the technical measures of quality are very limited and often focus on doing the obvious right thing for many patients rather than making more complicated decisions for complicated patients.  If the market functions well, well-informed physicians would refer patients to high quality (technical) doctors and these referral would increase practice funding to allow those practices to increase patient perceptions of quality (e.g., by improving amenities).  Patients may perceive bedside manner and amenities as luxuries that are not only valued in and of themselves but also for their signaling value that the physician is high quality.  Of course, physicians could take out a loan, build a nice clinic and attract new patients.  However, this approach is risky–particularly in a system with well-informed physician referrals–because they may not get many patients if physicians are not fooled by these amenities.  The resulting dynamic equilibrium is likely to be market-specific.

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