Regional variation in health care utilization in Sweden - the importance of demand-side factors

Differences in health care utilization across geographical areas are well documented within several countries. If the variation across areas cannot be explained by differences in medical need, it can be a sign of inefficiency or misallocation of public health care resources.

In this observational, longitudinal panel study we use regional level data covering the 21 Swedish regions (county councils) over 13 years and a random effects model to assess to what degree regional variation in outpatient physician visits is explained by observed demand factors such as health, demography and socio-economic factors.

The results show that regional mortality, as a proxy for population health, and demography do not explain regional variation in visits to primary care physicians, but explain about 50% of regional variation in visits to outpatient specialists. Adjusting for socio-economic and basic supply-side factors explains 33% of the regional variation in primary physician visits, but adds nothing to explaining the variation in specialist visits.

50-67% of regional variation remains unexplained by a large number of observable regional characteristics, indicating that omitted and possibly unobserved factors contribute substantially to the regional variation. We conclude that variations in health care utilization across regions is not very well explained by underlying medical need and demand, measured by mortality, demographic and socio-economic factors.