1. Health Economics & Policy 3rd Edition James W. Henderson
Chapter 8
The Market for Health Care Professionals

2. The Theory of Labor Markets
Input pricing
Demand for inputs
Human capital investment
Discounting and the rate of return on investment in human capital

3. Specialty and Geographic Distribution
Primary care-specialty care
Urban-rural
Physicians/100,000 population
141 in 1970
233 in 1994
Primary care physicians percent of all active physicians worldwide, only one-third in U.S. What would it take to reach the goal of 50% primary care physicians?
Should specialty mix be driven by patient preferences? OB/GYN
Geographic distribution--problems in attracting physicians to rural areas. What are the solutions?

4. Active Physicians in the U.S.

5. Physician Compensation
Pricing physician services
Organization of physicians’ practices
Mean income of $189,000 (net of practice costs and before taxes) in Over 25 percent had incomes of less than $100,000, mostly primary care and another 25 percent had incomes greater than $225,000, mostly specialists.
Highest paid specialties
Surgery $262,700
Radiology $259,800
Are physicians overpaid? What is the ROR to medical education? Based on a study by Weeks et al. (1994)
Primary care ROR 15.9%
Specialty ROR 20.9%
Dentists 20.7
Attorneys 25.4
Business 29.0

6. Medical Practice Incomes of Physicians, Net of Expenses

7. Models of Physician Behavior
Monopolistic competitor
Imperfect agent

8. Controlling Physician Behavior
Do physicians respond to incentives?
Empirical evidence on impact of financial incentives
Randomized trials (RAND experiment)
Same disease studies (Epstein, Begg, and McNeil, 1986)
Same physician studies (Welch, Hillman, and Pauly, 1990; and Murray et al., 1992)

9. Demand Inducement
Theory
Evidence

10. The Market for Nursing Services
Vilified, demonized like no other industry, except maybe tobacco.
Case manager to supervise provision of care--emphasis on prevention and access; cost savings incidental to treatment.

11. The Market for Dental Services

12. Summary and Conclusions
Motives for pursuing medical career
Changing incentive structure beginning to have an impact