Examining supplier-induced demand under regulated fees: dynamic panel evidence from Iran

Cataract surgery is among the most frequently performed procedures globally and in Iran, often regarded as highly effective and cost-efficient. However, its rapid growth, particularly under a fee-for-service model, raises concerns about supplier-induced demand, where providers may influence patients to undergo potentially discretionary procedures to maintain income. We analyzed administrative data from the Iranian Armed Forces Insurance Organization, covering active and retired military personnel and their families across all 31 provinces. In total, 108 055 cataract surgeries performed by 644 ophthalmic surgeons during the study period were included. As service provision and coverage for armed forces beneficiaries may differ from the general population, through dedicated military hospitals or subsidized services in public hospitals, the findings primarily reflect utilization patterns within this insured population. We employed regression-based methods to examine the relationship between surgeon density and surgery rates. A 10% increase in ophthalmologist density is associated with a 4.9%-6.2% increase in surgery count, 7.3%-7.9% in service volume, and 1.5%-1.9% in service value, indicating both quantitative and qualitative dimensions of inducement. Lagged service variables demonstrated significant persistence, reflecting clinical inertia. Income became a significant determinant only in the dynamic model, highlighting the role of latent demand-side factors. Our findings provide evidence consistent with supply-sensitive utilization patterns predicted by SID theory in Iran's cataract surgery sector. These insights underscore the need for targeted policy interventions, including payment reform, utilization oversight, and equitable workforce distribution, to align provider behavior with clinical necessity and system efficiency.