Controlling physician oversupply through certificate of need

By 1990 the aggregate supply of physicians in the United States is likely to exceed the population's requirements by 10 percent or more. State and regional aggregate and specialty-specific surpluses may be more extreme. Since the demand for physician services appears to be determined to a significant degree by the supply of physicians, the number of physicians who can maintain financially viable practices in a region is not likely to be limited effectively by the normal market interaction of supply and demand. Excessive physician supplies may, however, have a number of deleterious effects, including rapid escalation of health care costs, fragmentation of patient care, and a decrease in the quality of patient care. In this Article, the authors review the potential effectiveness of a number of policy interventions that might be employed to optimize physician supplies in areas of excess. They evaluate the following alternatives: (1) a limit on the number of medical school graduates; (2) control of physician residencies by number and by specialty; (3) creation or implementation of incentive policies; (4) control by hospitals--indirectly by limiting the number of beds, or directly by denying staff privileges; (5) widespread development of HMOs; (6) direct employment by the federal government of the majority of practicing physicians; and (7) creation of certificate of need for physician licensure is the alternative that shows the greatest promise of enabling the number and specialties of physicians providing patient care in areas facing a physician surplus to be managed in such a way that the populations of such areas can obtain adequate medical care at a reasonable cost.