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The "supply hypothesis" and medical practice variation in primary care: testing economic and clinical models of inter-practitioner variation


  • Davis, Peter
  • Gribben, Barry
  • Scott, Alastair
  • Lay-Yee, Roy


Medical practice variation (MPV) is marked, apparently ubiquitous across the health sector, well documented, and continues to be a focus of professional and policy interest. MPV have stimulated two paths of investigation, one economic in emphasis and the other more clinical in orientation; while health economists have stressed the potential role of income incentives in medical decision-making, health services research has tended to emphasise clinical ambiguity as a factor in practitioner decisions. Both sets of explanations converge in an implicit "supply hypothesis" that posits contextual practitioner and practice attributes as influential in clinical decisions. Data on inter-practitioner variation are taken from a large and representative regional survey of general practitioners in New Zealand, a country in which unsubsidised fee-for-service is the predominant mode of remuneration in primary care. The paper assesses the impact on three important areas of clinical decision-making -- prescribing, test ordering, request for follow-up -- of three key conceptual dimensions -- income incentives, physician agency, and clinical ambiguity (operationalised as local doctor density, practitioner encounter initiation, and diagnostic uncertainty respectively). Predictions are made about inter-practitioner variations in the rate of clinical activity in the three areas. The results of the analysis using multi-level statistical techniques are: 1. the extent of competition -- local doctor density -- seems to have no effect on the pattern of clinical decision-making; 2. doctor-initiated visits are, if anything, associated with lower rates of intervention; 3. diagnostic uncertainty is associated with higher rates of investigations and follow-up, both of which have clinical plausibility; 4. there is no significant interaction effect between density and uncertainty. It is concluded that, for the clinical activities studied and for the practitioner attributes as operationalised in this investigation, a clinical, rather than an economic, model of practitioner decision-making provides a more plausible interpretation of inter-practitioner variation in rates of clinical activity in general practice. The "supply hypothesis" requires further analytical refinement and empirical assessment before it can be applied as a generic explanatory framework for MPV.

Suggested Citation

  • Davis, Peter & Gribben, Barry & Scott, Alastair & Lay-Yee, Roy, 2000. "The "supply hypothesis" and medical practice variation in primary care: testing economic and clinical models of inter-practitioner variation," Social Science & Medicine, Elsevier, vol. 50(3), pages 407-418, February.
  • Handle: RePEc:eee:socmed:v:50:y:2000:i:3:p:407-418

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    Cited by:

    1. M. Lippi Bruni & L. Nobilio & C. Ugolini, 2007. "Economic Incentives in General Practice: the Impact of Pay for Participation Programs on Diabetes Care," Working Papers 607, Dipartimento Scienze Economiche, Universita' di Bologna.
    2. Harris, Matthew & Kessler, Lawrence & Murray, Matthew & Glenn, Beth, 2017. "Prescription Opioids and Labor Market Pains: The Effect of Schedule II Opioids on Labor Force Participation and Unemployment," MPRA Paper 86586, University Library of Munich, Germany, revised 28 Mar 2018.
    3. Viola Burau & Lotte Bøgh Andersen, 2014. "Professions and Professionals: Capturing the Changing Role of Expertise Through Theoretical Triangulation," American Journal of Economics and Sociology, Wiley Blackwell, vol. 73(1), pages 264-293, January.
    4. Fontanella, Cynthia A. & Early, Theresa J. & Phillips, Gary, 2008. "Need or availability? Modeling aftercare decisions for psychiatrically hospitalized adolescents," Children and Youth Services Review, Elsevier, vol. 30(7), pages 758-773, July.
    5. Julien Mousquès & Thomas Renaud & Olivier Scemama, 2008. "A refutation of the practice style hypothesis: the case of antibiotics prescription by French general practitioners for acute rhinopharyngitis," Working Papers DT18, IRDES institut for research and information in health economics, revised Oct 2008.
    6. Joan Costa-Font & Francesco Moscone, 2008. "The impact of decentralization and inter-territorial interactions on Spanish health expenditure," Empirical Economics, Springer, vol. 34(1), pages 167-184, February.
    7. Troels Kristensen & Kim Olsen & Henrik Schroll & Janus Thomsen & Anders Halling, 2014. "Association between fee-for-service expenditures and morbidity burden in primary care," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(6), pages 599-610, July.
    8. Grytten, Jostein & Sorensen, Rune, 2001. "Type of contract and supplier-induced demand for primary physicians in Norway," Journal of Health Economics, Elsevier, vol. 20(3), pages 379-393, May.
    9. Yiannakoulias, Nikolaos & Hill, Michael D. & Svenson, Lawrence W., 2009. "Geographic hierarchies of diagnostic practice style in cerebrovascular disease," Social Science & Medicine, Elsevier, vol. 68(11), pages 1985-1992, June.
    10. Mousquès, Julien & Renaud, Thomas & Scemama, Olivier, 2010. "Is the "practice style" hypothesis relevant for general practitioners? An analysis of antibiotics prescription for acute rhinopharyngitis," Social Science & Medicine, Elsevier, vol. 70(8), pages 1176-1184, April.
    11. Mangham-Jefferies, Lindsay & Hanson, Kara & Mbacham, Wilfred & Onwujekwe, Obinna & Wiseman, Virginia, 2014. "What determines providers' stated preference for the treatment of uncomplicated malaria?," Social Science & Medicine, Elsevier, vol. 104(C), pages 98-106.
    12. Pelletier-Fleury, Nathalie & Le Vaillant, Marc & Hebbrecht, Gilles & Boisnault, Philippe, 2007. "Determinants of preventive services in general practice: A multilevel approach in cardiovascular domain and vaccination in France," Health Policy, Elsevier, vol. 81(2-3), pages 218-227, May.
    13. Magali Dumontet & Carine Franc, 2015. "Gender differences in French GPs’ activity: the contribution of quantile regressions," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(4), pages 421-435, May.
    14. Grytten, Jostein & Sorensen, Rune, 2007. "Primary physician services--List size and primary physicians' service production," Journal of Health Economics, Elsevier, vol. 26(4), pages 721-741, July.


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