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Competitive behavior in local physician markets
M Brasure1, S C Stearns, E C Norton
1University of Minnesota, USA.
Medical Care Research and Review : MCRR
|December 10, 1999
Summary
Physician competition may be feasible in rural areas. Studies show that population increments needed for a second physician drop significantly, stabilizing at 3-5 providers, which is achievable for most of the US population.
Area of Science:
- Health Economics
- Healthcare Market Analysis
- Physician Market Dynamics
Background:
- Competition is often considered a cost-control mechanism in healthcare.
- However, physician competition is limited in rural areas due to fewer providers.
- Understanding physician entry patterns is crucial for assessing market competition.
Purpose of the Study:
- To analyze physician entry behavior in local markets.
- To determine the physician supply levels consistent with competitive behavior.
- To assess the feasibility of physician competition in rural areas.
Main Methods:
- Utilized the empirical framework by Bresnahan and Reiss.
- Analyzed physician entry patterns using longitudinal data.
- Focused on total and specialty physicians in nonmetropolitan health service areas.
Main Results:
- A notable drop in population increments was observed for the second physician's entry.
- Population increments stabilized at three to five physicians for subsequent entries.
- Over 93% of the US population resides in areas supporting this physician supply.
Conclusions:
- The unattractiveness of being a solo physician may explain the initial entry pattern.
- Rural areas can potentially support competitive physician markets.
- Mechanisms like managed care may be feasible given the observed physician supply levels.