Chapter 11 The Physician Services Market

1. There are two contrasting theories of physician behavior. The first is the traditional model and the second is referred to as “physician-induced demand” or “target income.”


a. Explain each model and describe how each of these models differs in their assumptions regarding physician behavior and patient information.


b. What would be the consequences of an increase in the supply of physicians on the price of physician services, the quantity of physician visits, and total physician expenditures of each of these theories?


2. What are some of the ways in which seek to compensate for the information advantage physicians have?


3. How do fee-for-service and capitation payment systems affect the physician’s role as the patient’s agent?

4. What information would you need and how would you use it to determine whether physicians were over- or underutilizing aides in their practice?

5. Large variations in physician fees exist for the same type of service within the same market area. Provide two alternative explanations for this variation; one based on a competitive market model and the other using a monopoly framework.

6. Why has the size of multi-specialty medical groups been increasing in the last several years?

7. Explain the advantages and disadvantages to a physician for joining a group practice as compared to being in solo practice.

8. Outline the structure of the physician services market. What features of this market differ from the purely competitive model? What changes, if any, would you suggest to change the performance of this industry?