Physician Dual Practice: Access Enhancement or Demand Inducement?

In many developing countries, the majority of physicians employed in government clinics also have a private practice. We develop a simple model to show that allowing dual practice helps low-income governments retain skilled physicians to assure patient access. If dual-practice providers differentially refer higher-income patients to private practice, public funding becomes more effectively targeted on the poor. Yet dual practice physicians may also skimp on effort, pilfer supplies, and induce demand. Patterns of care-seeking in Indonesia, especially disproportionate use of private providers by the urban poor, are consistent with exacerbated incentive for physician self-referral to private practice in urban areas.