Fixed fees and physician-induced demand: a panel data study on French physicians

Area of Science:

• Health Economics
• Medical Practice Analysis

Background:

• Physician-induced demand (PID) is a debated concept in healthcare economics.
• Understanding PID is crucial for healthcare policy and resource allocation.

Purpose of the Study:

• To investigate the existence and extent of physician-induced demand (PID) among French physicians.
• To analyze the relationship between physician supply and service utilization in the French ambulatory care setting.

Main Methods:

• Utilized a representative sample of 4500 self-employed French physicians (GPs and specialists) from 1979-1993.
• Employed generalized method of moments (GMM) estimators on panel data to account for unobserved heterogeneity.
• Controlled for fee-for-services (FFS) payment structures and physician fees.

Main Results:

• A slight decrease in the number of consultations was observed with increased physician-to-population ratios.
• Physicians compensated for fewer consultations by increasing the volume of care per encounter.
• Econometric evidence strongly supports the presence of PID in French ambulatory care.

Conclusions:

• The study provides strong empirical support for physician-induced demand in the French healthcare system.
• Physician behavior adjusts to maintain practice income despite changes in patient volume.
• Findings have implications for healthcare policy, cost containment, and physician payment models.