The effect of economic incentives on the education and distribution of physicians: A review

Abstract

This paper examines the available evidence on the impact of economic factors on the specialty and locational choices of physicians. Economic variables which influence the “rate of return” to the physician (profitability in relation to training costs) to alternative specialties and locational decisions include average yearly income, hours of work, price for each health service and training costs.

The findings of the review indicate that the rate of return to specialty training varies substantially among specialties. Rates of return to training in surgery and radiology are nearly three times that of other medical specialties. These rates of return differences are shown to have a small, albeit significant, effect on a physician's specialty as well as location choices. Furthermore, there is a positive relationship between the mean fees of physicians and the physician population ratio in an area, i.e., areas with more physicians have higher fees. Confounding the relationship between economic variables and specialty and locational choice is the fact that physicians may have substantial amounts of market power and can themselves influence the price of their services. Thus, the influence of reimbursement policies to alter the distribution of physicians may be less effective because physicians may have the ability to influence and alter the level of income and rate of return to training.