PHYSICIANS AND THE MARKET FOR MEDICAL CARE
I. Supply of physician services
A. Why is this important?
B. Three components of supply
1. Total supply
2. Geographic location supply
3. Medical specialty supply
C. Total supply
1. Total supply depends upon three variables
a. Number of physicians
b. Average hours worked
c. Productivity per hour worked
2. Total supply in an unfettered, competitive market
3. Does the U.S. have a doctor shortage?
a. Demand factors
1. Affordable Care Act
2. Aging population
b. Supply factors
1. Too few slots in medical schools
2. Too few slots in residency programs
3. Doctors working fewer hours
4. Government regulation of the physician workforce
a. Why does government regulate entry into the physician workforce?
1. Quality
2. Asymmetric information
b. How does government regulate entry into the physician workforce?
1. Medical school degree
2. Residency program
3. License
5. Physician hours worked
a. Factors affecting physician hours worked
1. Earnings per hour
a. Physician labor supply curve
b. Substitution and income effect
2. Non-medical practice income
3. Age
4. Gender
5. Medical specialty
6. Mode of practice
b. Empirical studies and implications
6. Physician productivity
1. Factors that increase productivity
a. Physician aides
b. Advances in technology
c. Retail clinics
2. Factors that decrease productivity
a. Scope of practice laws
b. Hospital employment
c. Direct primary-care and concierge medical practices
D. Geographic location supply
1. Misallocation of doctors across locations
a. Access to care
2. Factors that affect physician choice of location
a. Income
b. Quality of life
3. Government programs
a. National Health Services Corps
b. Conrad 30 J1 Waiver Program
c. Medicare Payment Incentive Program
d. How effective are these programs
4. Role of foreign medical graduates
E. Medical specialty supply
1. Primary and non-primary physicians
2. Misallocation of physicians across medical specialties
a. Medical care spending
b. Quality of care
3. Factors affecting specialty choice
a. Thornton and Esposto study (2003)
1. Annual vacation time
2. Length of residency program
3. Weekly hours worked
4. Annual earnings
5. Certainty of weekly work schedule
b. Nicholson study (2002)
II. Mode of practice
A. Three modes of practice
1. Government
2. Hospital
3. Private practice
a. Independent practice association
B. Government employment
1. VA hospitals
2. Locum tenens market
C. Hospital employment
1. Reasons for increasing hospital employment
a. Acquisition of medical practices
b. Preferences of young physicians
D. Private practice
1. Solo Vs group practice
2. Reasons for increasing group practice
a. Economies of scale
b. Profitable ancillary services
c. Patient referrals
d. Bargaining power
E. Independent Practice Association (IPA)
1. Contract as a group
2. Share services and investments.
3. Accountable Care Organization
III. Theories of physician behavior
A. Profit-maximizing theories
B. Utility-maximizing theories
a. Income-leisure theory
b. Principal agent theory
C. Income-leisure theory
a. Assumptions
b. Output supply curve
1. Aide employment effect
2. Physician hours worked effect
D. Principal agent theory
a. Principal agent relationship
b. Physician induced demand
c. Assumptions
d. Factors affecting physician induced demand
1. Method of payment
2. Physician to population ratio
3. Physician investment in medical facilities
e. Empirical studies
f. Insurers and health plans
IV. Defensive medicine
A. What is defensive medicine?
B. How does defensive medicine differ from physician-induced demand?
C. Why might a doctor practice defensive medicine?
1. Award cost
2. Malpractice premium cost
3. Time cost
4. Psychological cost
5. Reputation cost
D. The effect of defensive medicine on medical care spending
V. Physician payment system
A. Why is the payment system important?
B. Fee-for-service
1. Economic incentives
2. Actual fees
3. UCR fees
a. CPR fees
b. Incentives
4. RBRV fees
a. Fee schedule
b. Relative value units (RVUs)
1. Work effort
2. Medical practice expenses
3. Malpractice insurance expenses
c. Monetary conversion factor
d. Shortcomings of RBRV fees
e. Three payment systems starting 2019
1. RBRVS fee schedule
2. MIPS
3. APM
5. Discounted fees
C. Capitation
1. Economic incentives
D. Salary
1. Economic incentives
E. Withhold
1. Economic incentives
F. Bonus
1. Productivity bonus
2. Productivity measurement
3. wRVU productivity bonus
a. Possible shortcomings