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L9 Physicians2 PDF
L9 Physicians2 PDF
L9: Physicians
Department of Economics
Spring 2020
Market structure
Physician agency
Substantial increase in MDs: 350, 000 (mid 70s), 1, 000, 000 (2006),
920, 000 (2017)
Physician/patient ratio increased from 134 to 242 per 100, 000 last 30
years
Physician utility:
Um = U (ym,j , Aj )
Here ym,j and Aj are substitutes
Reasonable or not?
Is licensure necessary?
Data scarce
Criticisms
unlike EBM, pay is based on e¤ort rather than e¤ect/outcome ! to
overuse of complicated procedures
specialists reimbursed more than PCPs ! incentives to specialize !
leading to a lack of PCPs
the Specialty Society Relative Value Scale Update Committee (RUC) is
largely privately run
RUC holds meetings closed to the public and uninvited observers
MR to MD MC to patient + MC to patient 0
MD paid FFS, MD paid FFS,
+
patient pays OOP patient pays 0
MD salaried, MD salaried,
0
patient pays OOP patient pays 0
MD capitated, MD capitated,
patient pays OOP patient pays 0
“Other things equal, physicians would rather tell the truth, but they
would be willing to surrender some accuracy for some amount of
money income.” Pauly “Doctors and Their Workshops: Economic Models of Physician Behavior”, (1980)
You know, for me, it really is the right thing for me to do the CAT
scan. If I don’t do the CAT scan, you’ll probably lodge a complaint
about me. If I do the CAT scan you’re be really happy with me. In
addition, I’m almost certain that you daughter is …ne, but there’s a
maybe a 1 in million chance that she isn’t; that maybe there is a
hidden fracture and I’m missing it. And if that’s the case, the CAT
scan will save my butt. On the other hand, if I do the CAT scan and
your daughter gets cancer twenty years from now, no one will blame
me. In addition, I’m spending a lot of time talk to you that I would
be doing other things. If I got the CAT scan, I could do it in a
second and it would be done with, it would be easy. And …nally, the
really strange thing is, I’ll get paid more if I do the CAT scan. . . So
everything about this was pushing me to do the CAT scan.” Dr Jerome
Ho¤man
Target income
Similar to advertising
Budget constraint
Hay and Leahy (1982) – physicians do not receive less treatment than
non-physicians (no support for SID)
Dranove and Whener found support for SID where it shouldn’t occur
In sum, some evidence for SID but extremely di¢ cult to know its
extent
Socioeconomic variables explain some, but not all variation, nor does
insurance coverage
Regression framework:
utilization = βX + ε
where error may capture practice style
Currie et al
One of the most controversial issues in medicine is whether providers
should be evaluated in terms of their adherence to simple metrics
Some providers are much less likely to use invasive procedures on the
oldest and sickest patients, while others appear to pay little attention
to these factors
Phelps estimates that the welfare cost from the variation in coronary
bypass only is $750 million
Heuristics
Why do many MDs take a long time to adopt a new procedure, drug,
or treatment protocol that has demonstrated e¢ cacy? Why no hand
wash?