CHAPTER 5 THE PHYSICIAN LABOR MARKET Econ3004/ Econ6039 Health Economics, 2023 Semester 2 Dr Yijuan Chen, Australian National University Bhattacharya, Hyde and Tu – Health Economics Outline The training of physicians Medical school & residency Returns to medical training Work hours Barriers to entry Physician agency Physician-induced demand Defensive medicine
The training of physicians Bhattacharya, Hyde and Tu – Health Economics Medical school Entry into med school is competitive and
selective worldwide In the US, average 50% of applicants are accepted into
at least one school. UC San Diego, for example,
received 6767 applications in 2011 for 149 slots. In 2004, there were over twice as many applicants as
spaces at the UK medical schools. Medical school can be super-expensive
US: $140k -- $225k for four years European medical training often is heavily
subsidized Bhattacharya, Hyde and Tu – Health Economics Medical school Length of medical school varies across country US & Canada applicants must first get a bachelor’s degree Applicants need to have completed a pre-medical curriculum
of biology, physics, chemistry, mathematics, and English. The Doctor of Medicine (MD) program usually last 4 years.
European applicants go directly from high school The medical program lasts 5 years in the UK, and 6-7 years in
France Australian medical schools offer both Bachelor and Doctoral
degrees Bachelor of Medicine and Bachelor of Surgery (MBBS), usual
duration 6 years
Doctor of Medicine (MD), usual duration 4 years Bhattacharya, Hyde and Tu – Health Economics Medical school There are about 20 medical schools in Australia Medical School Affiliation Established
in Website Melbourne
Medical School University of
Melbourne 1862 http://medicine.unimelb .edu.au Sydney Medical
School University of
Sydney 1883 http://sydney.edu.au/m edicine University of
Adelaide Medical
School University of
Adelaide
1885 http://health.adelaide.e du.au/medicine/ UQ School of
Medicine
University of
Queensland
1936 https://medicine.uq.edu .au/ ANU Medical
School ANU 2004 http://medicalschool.an u.edu.au Bhattacharya, Hyde and Tu – Health Economics Residency In many countries, in addition to classroom work,
physicians-in-training must also gain hospital
experience Residency is a period of on-the-job training following
medical school, of which the duration is usually 3+ years. The first year of residency is often called internship, after
which doctors-to-be can apply for their license to
practice medicine.
After the residency, some doctors will further continue
their training in sub-specialties, which may take another
2-3 years, or even 5 years (e.g. cardiac surgery).
Bhattacharya, Hyde and Tu – Health Economics Residency Bhattacharya, Hyde and Tu – Health Economics Residency New residents lack experience, and when new
residents arrive at a hospital, empirical evidence
shows that medical errors go up “July effect” in the US “August killing season” in the UK
Bhattacharya, Hyde and Tu – Health Economics Physician work-hours Work hours Over 60 hours a week On call residents could work up to 30 consecutive hours In 2003, implementation to limit number of hours/week for
US residents No more than 80 hours a week No more than 24 consecutive hours Empirical evidence suggests no change in patient mortality. But there may be changes on non-fatal outcomes which
have not been studied. Bhattacharya, Hyde and Tu – Health Economics Work-hour tradeoffs Longer work-hours Pros:
more learning and accumulation of experience;
an in-patient may remain with the same doctor during her entire stay, and
thus receive more complete care Cons: Fatigue may impair physicians’ cognitive abilities and in turn
may affect patient health Shorter work-hours Requires more hand-offs by physicians and thus greater chance for
error Bhattacharya, Hyde and Tu – Health Economics Shorter hours leads to fewer errors
Landrigan (2004) conducted randomized experiment
at Brigham and Woman’s ICU at Harvard 2 groups of interns: traditional hours (80 hours/week) &
short work week (60 hours/week) Traditional hour group Committed 36% more serious medical errors 21% more medication errors 5.6 times more diagnostic errors Patient outcomes do not differ significantly Senior physicians intercepted most serious errors Bhattacharya, Hyde and Tu – Health Economics Shorter hours leads to fewer errors
However, one may argue that the less chance to make
mistakes also means the less chance to learn. A zero-work-hour intern will make zero error!
Thus one can conjecture that reducing residents’ work- hours may reduce errors by residents at the expense of
increasing errors by recent graduates of residency
programs.
Returns to medical training Bhattacharya, Hyde and Tu – Health Economics Returns to medical training Unlike most occupations,
returns to medical
training are very back- loaded Medical school & residency
expensive in direct costs
and opportunity costs So those who choose
being physician are
patient enough to value
future returns
Bhattacharya, Hyde and Tu – Health Economics Net present value Net present value is a way of calculating value of all
future streams of income (from today’s perspective) Discount factor δ is a measure of how much less an
individual values future income over present income δ lies between 0 and 1; small if impatient and large if
patient Those with high δ have high NPV from being a physician Those with low δ have low NPV (and maybe even
negative NPV) Bhattacharya, Hyde and Tu – Health Economics Discount factor Another way of expressing discount factor is: Where r is the discount rate, analogous to the
market interest rate that would make a person with
discount factor δ indifferent between saving for
tomorrow and spending today Ex: δ = 0.90 corresponds with r = 0.11 High patience means a high discount factors δ
and a low discount rate r δ = 1/(1+r) Bhattacharya, Hyde and Tu – Health Economics Internal rate of return (IRR) Consider two possible career choices P and S with incomes
paths Ip and Is Internal rate of return r* is the discount rate which
equalizes the NPV of both careers (or the difference
between NPV(p) – NPV(s) = 0 )
Someone with IRR of r* values career P and career S exactly equally
Bhattacharya, Hyde and Tu – Health Economics Internal rate of return (IRR) Bhattacharya, Hyde and Tu – Health Economics Internal rate of return IRR in medicine is typically between 11% and 14%!
Significantly higher than market interest rate This is true for dentists and lawyers too IRR may be even higher for medical specialists like
neurosurgeons and immunologists
Bhattacharya, Hyde and Tu – Health Economics Internal rate of return Bhattacharya, Hyde and Tu – Health Economics Internal rate of return The fact that the IRR has stayed high is curious It suggests that being a physician is highly lucrative Bhattacharya, Hyde and Tu – Health Economics Internal rate of return Bhattacharya, Hyde and Tu – Health Economics Internal rate of return The fact that the IRR has stayed high is curious Why hasn’t the high income attracted more physicians,
which would have pushed the IRR back down to market
levels?
Bhattacharya, Hyde and Tu – Health Economics Barriers to entry Barriers to entry may explain the high IRR In 19th century, becoming a doctor was simple Anyone could do it, no regulation about training American Medical Association (1847) Pre-req’s for medical school 4 years medical school Require doctors to have a license to practice 1910 Flexner Report helped shut down low-quality med schools
Caps on medical school class size
Caps on residency program enrollment Result: fewer medical schools and fewer medical students Bhattacharya, Hyde and Tu – Health Economics Tradeoffs from barriers to entry Because of barriers to entry, consumers have to pay
above the competitive price Physicians therefore earn monopoly rents Def. wages above the competitive price due to artificial
constraint of the market On the other hand, barriers to entry ensures that
physicians are qualified The monopoly rents the patients pay for good health
care may outweigh the patients’ cost to search for good
health care in a more competitive market
Physician agents Bhattacharya, Hyde and Tu – Health Economics Physicians as agents Patients trust physicians to act as perfect agents
for their health Doctors’ foremost concern should be patients’ well- being Not their own financial status or reputation Are doctors always perfect agents for their
patients?
Bhattacharya, Hyde and Tu – Health Economics Physician-induced demand (PID) Information asymmetry between doctor and
patient Patients cannot assess whether an extra test or
procedure ordered by doctor is necessary
Doctors may have the financial incentive to
prescribe more services than needed Bhattacharya, Hyde and Tu – Health Economics Physician-induced demand (PID) Hickson et al. (1987) randomly assigned a group
of pediatric residents to be either paid by a fixed
salary or paid according to the amount of service
provided (fee-for-service) The “fee-for-service” group scheduled more visits
per patient: than the fixed-salary group.
than recommended by the American Academy of
Pediatrics Bhattacharya, Hyde and Tu – Health Economics Physician-induced demand (PID) Empirical studies also find that Thoracic surgeons compensated for a round of cuts to
Medicare fees in 1990 by performing more surgeries. ( Yip
1998) Physicians who recently became owners of back and spine
clinics recommended more surgeries than before they opened
their own clinics. (Mitchell , 2008)
Physicians who owned their own MRI machines ordered more
MRI tests than those who had to refer patients to outside MRI
scans. (Baker 2010) Bhattacharya, Hyde and Tu – Health Economics Physician-induced demand (PID) The existence of PID poses a challenge to insurers: Setting high reimbursement could lead to doctors to over
prescribe certain procedures. Setting low reimbursement could cause the doctors to
substitute the appropriate procedure by other, more
lucrative, procedures.
Bhattacharya, Hyde and Tu – Health Economics Defensive medicine Doctors fearful of lawsuit may overprescribe (and
overcharge) for only marginally-useful procedures Between 1991 and 2005, 7.4% of all US physicians
covered by a large liability insurer faced at least one
medical malpractice lawsuit. The average payout on
successful claims was $274,887.
(Jena, et al. 2011)
Mello et al. (2010) estimate that medical liability
system in the US costs $55.6 billion annually
Bhattacharya, Hyde and Tu – Health Economics Defensive medicine Studdert et al. (2005) show that, Among the high-risk
practitioners in Pennsylvania, USA 93% of surveyed doctors reported practicing defensive
medicine.
59% conducted more diagnostic tests than they thought
were medically necessary. 39% avoided caring for high-risk patients in order to
reduce their exposure to liability. Bhattacharya, Hyde and Tu – Health Economics Conclusion Physician supply highly regulated Leads to a shortage of doctors Hard for other health care providers to fill the void Investment returns to being a doctor and
specializing is very high Physicians are not always perfect agents of care Overutilization of care Physician-induced demand and defensive medicine 51作业君版权所有
