the physician market part 1
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- 1. The Physician Market, Part 1 Professor Vivian HoHealth Economics Fall 2007 These slides draw from material in Santerre & Neun, Health Economics, Theories, Insights and Industry Studies, Thomson 2007.
- Physician Market Structure
- Conduct in the Physician Market
- Physician Market Performance
- Physician Practice Management Companies
3. 4. Physician Market Structure 5. *The AMA defines primary care as including family practice, general practice, internal medicine, obstetrics/gynecology, and pediatrics. Physician Market Structure(cont.) 6. Are there too many specialists and too few primary care docs?
- Proportion of specialists in U.S. higher than in W. European countries and Canada (60% vs. 25-50%).
- Specialists more prone to use new, high-tech medical procedues.
- May explain why U.S. medical costs per capita are highest in the world.
7. Matching Physician Supply & Requirements
- Future physician supply does not appear well-matched with requirements.
- (Politzer, 1996)
- A shortage of 33,000 primary care physicians is predicted by 2020.
- The same set of assumptions also generates a surplus of specialists.
8. Distribution of Physicians by Mode of Practice
- Most docs self-employed, but % is dropping.
- Fall in solo practice docs, rise in salaried docs.
- Reflects rise in ambulatory care by HMOs.
9. Distribution of Physician Revenues by Source of Payer
- % of revenues from Medicare/Medicaid high, but lower than for hospital sector.
- % of revenues paid out-of-pocket also higher than for hospital sector.
10. Managed Care Reimbursement of Physicians
- MCOs hope to modify physician behavior in order to control costs.
- 91% of all practicing docs in 1999 had at least one managed care contract.
- In 1999, 49 of every $1 of physician revenue came from an MCO.
- 7 of every $1 came from a capitated contract.
11. Are there barriers to entry?
- Requirements for licensure to practice
- M.D. from accredited med school.
- Internship or residency at recognized institution.
- Pass a medical exam.
- Protects public from incompetent doctors.
- State licensure boards controlled by physicians who can restrict entry to keep salaries high.
12. Is market reform better than government licensure?
- Market reform may encourage physician monitoring better than government regulation.
- More salaried docs are being monitored by HMOs.
- Laws shifting medical malpractice liability towards hospitals and HMOs.
- For-profit providers have direct financial stake in quality of their physicians.
13. Production, Costs, andEconomies of Scale
- Do certain physician organizations have a production or cost advantage?
- Group practice physicians are 22% more productive than those in solo practice.(Brown, 1988).
- The lowest-cost practice size has been estimated at 5.2 physicians(Pope & Burge, 1996).
- Economies of scale may exist for practices as large as 100 physicians(Marder & Zuckerman, 1985) .
14. Production, Costs, andEconomies of Scale
- Analysis of physician practice costs based on the AMA 1989 Socioeconomic Monitoring System.(Escarce & Pauly 1998)
- Survey of physician practice costs, outputs, and practice characteristics.
- Physicians receive payments from patients and insurers.
- But they then docs have several costs to cover.
- Nurses, admin & clerical workers, technicians and aids.
15. Production, Costs, andEconomies of Scale $7.26 (1.08) $35.36** (2.12) Test interpretation $4.84 (1.35) $12.14** (2.16) Hospital visit $14.77*** (2.91) $22.14*** (3.26) Office visit, est. patient $66.34** (2.00) $59.99* (1.68) Office visit, new patient Marginal non-phys. Costs Full Marginal Cost Output 16. Physician Market Structure Summary
- Physicians have outpaced growth in the general population.
- The U.S. may have too many specialists and too few generalists.
- A move towards multi-physician practices.
- Production & cost advantages.
- Pressures of managed care.
- Despite barriers to entry, competition isincreasing.
17. Physician Market Conduct
- The Supplier-induced demand hypothesis.
- The legal environment and physician behavior.
- The impact of managed care on physician conduct.
18. Has the over-supply of physicians led to physician-induced demand?
- Defn: physicians may take advantage of asymmetric information to convince their patients to consume more medical care than would be in their self-interest.
- How much care can physicians induce?
- Easier with surgery?
- Is the physician willing to induce?
- Can insurers limit demand inducement?
19. Has the over-supply of physicians led to physician-induced demand?
- Can insurers limit demand inducement?
- The empirical evidence on physician-induced demand is limited.
- The exception may be the market for surgical services, where surgeons have a greater ability to manipulate demand.
20. Defensive Medicine &Malpractice Reform
- Physician malpractice premiums account for 1% of US health care spending.
- Physicians may over-provide care in order to avoid malpractice suits.
- Defensive medicine may add another $4b to $25b to the nations health care bill.
21. Defensive Medicine &Malpractice Reform
- States which implemented direct reforms to their malpractice system (caps on damages, abolition of punitive damages) reduced hospital expenditures 5 to 9%.
- Indirect reforms (caps on contingency fees, mandatory periodic payments) had no measurable impact on costs.
22. Why do we have a malpractice system?
- The malpractice systemcompensatesvictims for negligence anddetersfuture negligence.
- Tort Law:entitles an injured person to compensation as a result of someones negligence.
- Damages include economic losses and pain and suffering.
23. PROBLEMS WITH THECURRENT SYSTEM
- Physician Advocates
- Too many of the claims filed are not due to negligence.
- Juries award large sums unrelated to actual damages.
- The threat of claims leads to defensive medicine, which adds billions to the nations health expenditures.
24. PROBLEMS WITH THECURRENT SYSTEM
- Patient Advocates
- The number of claims filed grossly underestimates the extent of physician negligence.
- Large jury awards are infrequent.
- Current quality control mechanisms are inadequate.
- Defensive medicine is a byproduct of generous insurance coverage for patients, not malpractice insurance.
25. Harvard Medical Practice Study (HMPS)
- 1)What is the incidence of adverse events
- and negligent adverse events in
- 2)What are the total economic losses
- patients suffer from adverse events?
- --What fraction is covered by the tortsystem and other insurance?
- 3)What percentage of adverse events
- (negligent and non-negligent) lead to
- malpractice claims?
- From 51 nonfederal, acute care hospitals in New York
- 31,429 patients discharged in 1984
- Stratified sample based on hospital and patient characteristics
- e.g.Geographic region, patients in high- risk specialties
27. Criteria for an Adverse Event
- A definable injury caused at least in part by medical management (negligent or not).
- The injury must have produced measurable disability that prolonged the hospital stay or reduced function at time of discharge.
- The injury must have been unintended.
NEJM 1989 28. Which of the following is NOT an adverse event?
- Intracerebral hemorrhage caused by anticoagulants
- Incisional hernia
- Amputation of a gangrenous leg