Physician Labor Supply

Abstract

As the key clinical decision-makers, physicians provide an essential input into the production of health care for their patients. Understanding the determinants of physician labor supply has important implications for the production and cost of care and for health care access. Hence, physician labor supply is a topic of considerable interest in health economics. This article examines the factors affecting physician labor supply. Labor supply measures are considered broadly, and may include annual hours worked, numbers of surgeries performed, office visits, and so on. The authors’ focus is on the labor supply decision, given a fixed number of physicians in the market. They provide a general framework discussing the competing goals of the physician in choosing labor supply and review studies that have examined a number of key issues affecting the labor supply decision. This article will cover the conceptual issues in the physician labor supply decision; the relationship between physician earnings and labor supply; the effects of competition and physician fee schedules on labor supply; the roles of the so-called ‘target income hypothesis’ and more recently reference incomes as they pertain to the labor supply decision; physician labor supply under managed care; and the effect of malpractice liability on labor supply.