Physician-induced demand for surgery

Area of Science:

• Health Economics
• Medical Market Analysis
• Physician Behavior Studies

Background:

• Builds upon prior research on surgeon-induced demand by Fuchs.
• Addresses limitations in data and econometric methods of previous studies.
• Investigates the interplay between neoclassical and inducement theories in surgical markets.

Purpose of the Study:

• To empirically test neoclassical and inducement theories of physician demand.
• To estimate physician demand and equilibrium fees for surgical procedures.
• To identify factors contributing to market failures in surgical services.

Main Methods:

• Employs a simultaneous equation model for estimation.
• Utilizes data from 350 primary sampling units (PSUs) spanning 1969-1976.
• Tests alternative models including increasing monopoly and disequilibrium frameworks.

Main Results:

• Provides strong evidence for competitive market failure, particularly in large metropolitan areas.
• Higher surgeon density is associated with increased surgical fees and utilization rates.
• A statistically significant, though small, price elasticity of demand for surgery was observed.

Conclusions:

• Findings support the concept of market failures in healthcare, where provider supply influences demand.
• Surgeon availability significantly impacts surgery rates, even in areas with plentiful providers.
• The study contrasts with Fuchs's findings on shift elasticities and price elasticity of demand.