physician supply

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Shortage! Shortage!…Shortage???

January 28, 2009 in Physician Compensation, Specialists, Supply of Medical Services | 3 comments

In the news, you often hear that there are shortages of nurses and physicians.  We need more nurses and physicians, right?  According to an editorial by Laurence Baker in Health Services Review, we should be a little skeptical of calls for more and more healthcare providers.  If supplier-induced demand is a problem, more providers will only increase the amount of medical care provided.  For instance:

  • Bunker (1970) found that in 1967, “there were 39 surgeons per 100,000 persons in the United States, and less than half as many—18 per 100,000—in England and Wales. America, he also found, had a much higher rate of surgery, about 7,400 surgeries performed per 100,000 people in 1965, about twice the 3,770 reported for 1966 in England and Wales.”
  • Fuchs (1978) “estimated that 10 percent increases in the surgeon/population ratio resulted in about a 3 percent increase in per capita utilization of surgeries.”
  • “Sloan and Schwartz (1983) concluded that a 10 percent increase in the supply of physicians would be associated with a 4 percent increase in spending for physician services.”
  • Fisher et al. (2003 a, b) “…argued that in the Medicare program, having more specialists per capita in an area is associated with higher surgery rates and higher procedure rates.”
  • “Baicker and Chandra (2004) showed that states with the more specialists tend to rank lower in quality than states with fewer, and vice versa for generalists.”

Does expanding supply the of physicians unambiguously improve health care quality?  No.  It is likely that increasing the supply of primary care physicians will increase quality and increase cost at a slower rate.  On the other hand, an increase in the supply of specialist may or may not improve quality and will almost certainly increase costs.  Increasing the supply of physicians may improve health care system, but it should not be dogma that this is always the case.

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Are Family Physicians Good for you?

March 4, 2008 in Econometrics, Supply of Medical Services | Permalink

Most public health officials believe that increasing the supply of primary care doctors is almost always a good thing, while increasing the number of specialists can have mixed results. One problem is that physician supply is endogenous. One may believe that physicians prefer to locate in wealthier areas. If wealthier people are also healthier, then a correlation will exist between physician supply and health even though no causality exists.

In order to isolate the direct causal effect of increasing family physician supply, Gravelle, Morris and Sutton (2008) use an instrumental methods methodology. The two instruments for physician supply are: an index of local area housing prices and average age-related capitation payments. Since physicians location decisions are regulated by the Medical Practices Committee and do not include a cost-of-living adjustment, we would expect lower physician supply where there housing prices are higher. Local area average capitation payments should not effect any individual’s health, but should attract increased family physician supply.

These instruments are implemented on the Health Survey of England data set. Physician supply comes from the General Medical Services (GMS) Statistics database.

Health levels are either measured as very good, good, fair, bad, or very bad. In this case, an ordered probit regression is used. The authors also utilized the EQ-5D continuous scale health measure. With the continuous variable, a least squares regression model is used. What are the results?

When no instruments are used FPs [family physicians] have a positive but statistically insignificant effect on health. When FP supply is instrumented by age-related capitation it has markedly larger and statistically significant effects. A 10 percent increase in FP supply increases the probability of reporting very good health by 6 percent.

Since almost all medical care and pharmaceuticals are free to patients, increased physician supply will not act to reduce prices. Nevertheless, more family physicians can make going to the doctor more convenient and can reduce waiting times, thus increasing the number of family physician visits per individual per year.

One interesting econometric technique used in this paper is that of the anti-test. A paper by Dranove and Meher (1994) criticizes the use of instrumental variables because the use of some instruments can be used to “prove” that increased physician supply “causes” increased childbirth. This is obviously a nonsensical correlation. In this paper, the authors use instrumented and noninstrumented family physician supply to see these variables have any effect on the individual’s ethnicity. Neither the instrumented or noninstrumented physician supply has any impact on ethnicity. Thus, we have some indication that the two instruments chosen by the authors are valid.

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