Determinants of PHC productivity and resource utilization: a comparison of public and private physicians in Macedonia

The dominant reform paradigm for developing countries introduces market forces into health care provision to improve quality and efficiency. Yet, there is very little empirical evidence as to how individual physicians respond to such incentives. Using a survey of primary health care providers in the Republic of Macedonia, the effect of privatization on physician workload and resource utilization is examined. The survey of physicians in public and private clinics provides extensive data on physician demographics, practice patterns and capital inputs, with an innovation being a measure of physician skill based on responses to several clinical vignettes. Physician production of patient visits is modeled as a jointly determined process of workload and input utilization. Such a formulation acknowledges the endogeneity of input and output and, more importantly, allows the straightforward estimation of the demand equations for labor and capital inputs. Controlling for physician and practice characteristics, private physicians do exhibit higher productivity and greater capital resource use per patient. Major factors influencing workload and resource use are skill and referral rates, both of which have important implications for designing comprehensive and effective physician incentive systems.