Supplier-induced Demand Research Articles

Anticipated benefit termination and health care consumption responses: Evidence from a quasi-experiment

This study is among the first attempts to explore the behavioral responses of anticipated preferential treatment retraction from low-income individuals in the context of health insurance. Utilizing a unique quasi-experimental setting in China, we capture health care demand responses to anticipated benefit termination using a difference-in-differences design. We find a significant increase in individuals’ inpatient health care consumption in anticipation of losing generous insurance benefits. We further investigate the increased consumption and the results suggest that it is largely associated with providing necessary treatments. Additionally, we do not find evidence of supplier-induced demand. In terms of heterogeneity, we find that individuals with chronic disease history, more education, and higher income tend to be more responsive in increasing their health care consumption. While policy evaluations usually focus on the effects upon implementation, our findings shed light on the end-of-benefit responses, and the importance of providing education sessions and liquidity support on individuals’ dynamic decision-making, these findings are meaningful in fully evaluating the impact of insurance contractions.

Unintended effect of reduced patient cost sharing: evidence from China

ABSTRACT In China, hospitals are classified into three tiers based on size and quality to triage patients. Among them, tier-2 and tier-3 hospitals provide similar inpatient services, while tier-3s have higher patient cost sharing due to their ability to provide more sophisticated care. In this study, we exploit a plausibly exogenous change in the financial environment facing tier-2 hospitals: reduced cost sharing in tier-3s. We find that patients are diverted from tier-2s after the reform, and in response to income loss, tier-2s increase the surgical probability and total expense per admission. A 1% decrease in the number of admissions increases the surgical probability by 0.25%, which suggests supplier-induced demand. We also find that tier-2 hospitals induce greater demand from patients with less urgent conditions and more elective procedures. Our analysis suggests that benevolent cost sharing reduction may have unintended consequences beyond the targeted group, and policymakers who neglect these effects would underestimate the costs of such reforms.

A Groundbreaking Insight Into Primary Care Physiotherapists' Remuneration.

Introduction Physiotherapy in Greece, as part of primary health care (PHC), faces sound imbalances: reduced quality, productivity, and efficiency, along with rather inflexible remuneration schemes. This study is aimed at reporting the attitude and perceptions of Greek PHC physiotherapists towardtheir current remuneration and also at identifying any other preferable remuneration schemes. Methods A stratified proportional sampling study was undertaken, using an anonymous, electronic survey. The participants were 250 self-employed physiotherapists running their business in Central and Eastern Macedonia and Thrace, being also contracted with the National Organisation for Healthcare Provision (EOPYY). The sample size stands for 34% of the population with a circa 5% margin of error. Results Nearly 9/10 physiotherapists (84%) underline that remuneration falls short of their productivity, leading to reduced job satisfaction. Moreover, their remuneration does not motivate them to provide services of higher quality (46%), while 58% of them stated that they are forced to claim informal fees. There is no clear desire regarding the remuneration scheme, but nearly ¼ of physiotherapists revealed their preference for the cost-per-case philosophy combined with co-payments. Conclusion The majority of physiotherapists believe that their current remuneration does not reflect their productivity nor the quality of their services and, therefore, informal payments arise. The preference of physiotherapists lies between cost-per-case fees and patient co-payments, which, however, favors supplier-induced demand and access inequalities, respectively. Hence, policymakers should revise the current remuneration scheme and overcome its deficiencies without creating new ones.

The role of supplier-induced demand on the occurrence of information overload in managerial reporting environments.

This article develops a model showing how information reporters influence information load among decision makers and generate supplier-induced information demand (SID). The intra-corporate information-providing process is an expert market with information asymmetry. I show that information overload occurs as an SID and is the result of informational overconsumption deliberately caused by the supplying reporter. My analysis highlights that the information overload depends on the specificity of information. It also shows that the decision maker may face a hold-up situation in light of switching costs. The more specific the information needed, the higher the threat of information overload. The strategic content of information tempts reporting managers to overload the decision maker for the purpose of increasing their reporting transfer price and to discourage the decision maker from getting the information from another reporting manager. Although the decision maker knows a part of the information demand, information overload involves the cost of using unnecessary inputs, information overload occurs as an SID of information, even if other competing reporting managers exist. My analysis demonstrates that information overload can occur due to uncertainty and opportunism of both the decision maker and reporting managers.

Analytical Investigation of the Factors Affecting the Supplier-Induced Demand in Healthcare: A Case Study of CT Scanning Department

The aim of this study was to investigate the factors affecting the supplier-induced demand in health care with the help of an analytical-survey approach and using a questionnaire tool, and to analyze the role of medical technology centers, such as centers equipped with a CT scanning department, in development of this type of demand. The statistical population of the present research consisted of the patients referring to this department, out of whom 80 people were selected as the research sample using the simple random sampling method. After checking the normality of the data distribution through the Kolmogorov-Smirnov test, three research hypotheses were developed, all of which were confirmed by analyzing them using the Pearson correlation parametric test. The results of the data analysis indicated that the low patient information, high physician information, and high costs of healthcare service provider institutions have a positive effect on the supplier-induced demand in healthcare (especially in the departments with therapeutic technologies such as CT scanning). In addition, according to the results, the variable of high costs of healthcare provider organizations plays a more significant role in development of supplier-induced demand for healthcare providers, compared to the other two variables.

New evidence on supplier-induced demand in China's public tertiary hospitals: is the cost of hospitalization higher in the off-season?

Supplier-induced demand (SID) is a long-standing concern in health economics and health system studies; however, empirical evidence on SID-critical to the development of health policy-is difficult to obtain, especially from China. This study, therefore, aims to add new evidence on SID in China's public tertiary hospitals and facilitates the development of evidence-based health policies in China and other countries with similar healthcare systems. For this study, we used patient-level electronic medical records (EMRs) collected from the information systems of tertiary hospitals in a western province in China. From 11 tertiary hospitals, we collected 274,811 hospitalization records dated between 15 February and 30 November 2019. Total expenditure on hospitalization and length of admission of each patient were the primary metrics for measuring SID. We constructed a character indicator to measure the high-season or off-season status of hospitals, and log-linear estimations were applied to estimate the "off-season effect" on hospitalized expenditures and length of admission. We find that the cost of hospitalization is indeed higher in the off-season in China's public tertiary hospitals; specifically, expenditures for patients admitted in the off-season increased by an average of 5.3-7.9% compared to patients admitted in the peak season, while the length of admission in the hospital increased by an average of 6.8% to 10.2%. We also checked the robustness of our findings by performing subgroup analyses of EMRs in the city-level hospitals and surgical group. We name this phenomenon the "hospital off-season effect" and suggest that the main reason for it is inappropriate financial incentives combined with a Fee-For-Services payment method. We suggest that China should work to reform inappropriate financial incentives in public hospitals to eliminate SID by changing its payment and financing compensation system.

Association between bed supply and pneumonia hospitalization according to hospital types in Korea

Abstract Background An ecological study was conducted to determine the causes of regional differences in hospitalized pneumonia incidence in Korea. We evaluated the association between regional bed capacity and pneumonia hospitalization rates, and the interaction of hospital type. Methods Variables of hospitalized pneumonia patients (n = 2,226,243) aged 19 years from 2015 to 2020, prior to the COVID-19 pandemic, were extracted from the Korean National Insurance database. Age-standardized pneumonia hospitalization rates per 10,000 population by region and year were calculated. Multilevel linear regression was conducted to assess the association between the regional number of beds by hospital type and pneumonia hospitalization rates. The multilevel analysis was stratified by length of stay (LOS) and whether recommended clinical practices for pneumonia treatment were performed during hospitalization. Results Pneumonia hospitalization rates were highest in the Gwangju metropolitan city. The excessive pneumonia hospitalization rate in Gwangju occurred mainly in primary care (PC) and nursing care (NC) hospitals. A significant positive association between regional number of bed supply and pneumonia hospitalization rates (p-value=0.0157) was found. Interaction effect of hospital type and regional bed number supply was statistically significant (p-value<0.001). Positive association between regional bed supply and hospitalization rates was prominent in low grade hospitals, such as PC or NC hospital, and with the poor adequacy of pneumonia care, including long LOS and without recommended clinical practices. Conclusions The results suggest that while public health benefits can be expected from increased regional bed availability, there may be unexpected harms associated with supplier-induced demand for hospitalization, mostly in inferior hospitals. Therefore, hospital type and quality of medical care also should be considered in the process of expanding bed capacity in a region. Key messages • Regional difference of pneumonia hospitalization rates was associated with hospital bed capacity. • Supplier induced hospitalization of pneumonia occurred mainly in inferior type of hospital.

Suburban Blues: Urbanicity, healthcare service mix and spatial patterns of admissions for depression

Abstract Objectives Medical practice variation is a key target for policy makers aiming to improve the efficiency of healthcare delivery. Studies point to strong regional variation in healthcare utilization in Austria which seems to be a by-product of institutional rules and healthcare service mix rather than variance in epidemiology. Methods We use a set of routine healthcare data on hospital admissions for depressive episodes (ICD-10 F320-F329) of adult Austrian patients from 2009 to 2014 on the municipality level to explore spatial patterns of supply-induced demand by nearby hospitals (“Roemer's law”) in hospital admission rates. The dataset covers 99,844 hospital episodes of 69,555 patients in 2,114 municipalities. We estimate a random effects spatial autoregressive model to regress log hospital admission rates on hospital supply and urbanicity as proxies for the municipalities’ healthcare service mix alongside a set of relevant socio-economic/-demographic characteristics. Preliminary results Hospital admission rates per 1,000 inhabitants in the population for depressive episodes vary strongly between municipalities (min=0, max=37.7, mean=1.9, SD = 1.8). We find higher admission rates in the population of suburban municipalities (0.10, 95%-CI: 0.58 - 0.13) and municipalities with hospitals (0.07, 95%-CI: 0.01 - 0.1), regardless of hospital type and size. The spatial structure suggests positive spill-over effects on the hospital admission rates between neighbouring municipalities. Conclusions Our results suggest that high admission rates are a seemingly suburban phenomenon and that healthcare service mix is a driving factor for admission rates. Though it is not clear whether the regional variation in medical practice reflects under- or oversupply of hospital care, promoting timely access to primary care and early-stage treatments may reduce the burden of avoidable hospitalizations for patients and public budgets, and close a gap of unmet need for care of vulnerable populations. Key messages • Hospital admission rates for depression of adults per 1,000 inhabitants in the population for depressive episodes vary strongly between municipalities. • Hospital supply and urbanicity are major driving factors of the spatial patterns in regional varation of hospital admissions.

Payment Systems, Supplier-Induced Demand, and Service Quality in Credence Goods: Results from a Laboratory Experiment

This experiment examines the relationship between payment systems and the quality and quantity of services provided in credence goods markets. By using a real-effort task to stimulate the decision making of service providers, the study finds that payment systems do indeed have an impact on service provision. Specifically, providers in fee-for-service systems over-provide, while those in salary systems under-provide services. Additionally, there is a lack of alignment between the services provided under fee-for-service and the actual needs of customers, resulting in a substantial loss of customer benefits under fee-for-service in comparison to under salary. The study also finds that providers in fee-for-service systems perform more faulty tasks than those in salary, indicating that they may prioritize quantity over quality in their services. As for insurance, the results of this study show no significant effect of insurance on the number of services provided; however, customers without insurance received significantly more faulty tasks. Based on these results, the study concludes that payment systems play an important role in determining the quality and quantity of services provided in credence goods markets. Overall, this study highlights the need for a better alignment between customer needs and services provided under fee-for-service systems.

How does market competition affect supplier-induced demand? An experimental study.

This study investigated the impact of competition on supplier-induced demand in medical markets theoretically and experimentally. We employed the framework of credence goods to describe the information asymmetry between physicians and patients, and theoretically derives predictions of physicians' behaviors in monopolistic and competitive markets. Then we conducted behavioral experiments to empirically test the hypotheses. The theoretical analysis revealed that an honest equilibrium would not exist in a monopolistic market, whereas price competition could induce physicians to reveal their types of treatment cost and provide honest treatments; thus, a competitive equilibrium is superior to that of a monopolistic market. The experimental results only partially supported the theoretical predictions, which showed that the cure rate of patients in a competitive environment was higher than that in a monopolistic market, although supplier-induced demand occurred more frequently. In the experiment, the main channel through which competition improved market efficiency was increased patient consultations through low pricing, as opposed to the theory, which stated that competition would lead to physicians' honest treatment of patients through fair prices. We discovered that the divergence between the theory and the experiment stemmed from the theory's reliance on the assumption that humans are rational and self-interested, which means that they are not as price-sensitive as predicted by theory.

Does the Type of Healthcare Financing Systems Matter for Efficiency?

This article aims to identify whether the type of healthcare system financing matters in terms of efficiency. The study covered 35 OECD countries, which follow either the Bismarck system or the Beveridge system. The span of analysis covers the year 2015. Data were derived from OECD statistics and Eurostat databases. In purpose to analyse the impact of the financing method on the overall efficiency of the healthcare system, the developed model of Anderson was employed. Thus, the model allowed us to examine both—the components of the healthcare system, resources, population characteristics, benefits and outcomes, and the relationship of individual components to each other, expressed through efficiency, effectiveness and equality. In addition, statistical methods were used such as descriptive analysis, the independent sample t-test and the Pearson correlation coefficient. It was found that countries of the Bismarck system possess more hospital beds and simultaneously more curative care bed days are provided. It could imply the existence of a supply-induced demand problem. In the case of efficiency, the Bismarck states were found to have a more efficient medical doctor as they provide more consultation per inhabitant than their Beveridge counterparts. However, the Beveridge states were found to have more efficient usage of curative care beds as their bed occupancy rate is higher than Bismarck counterparts.

How Do Primary Care Providers Respond to Reimbursement Cuts? Evidence From the Termination of the Primary Care Incentive Program.

The Primary Care Incentive Payment Program (PCIP) provided a 10% bonus payment for Evaluation and Management (E&M) visits for eligible primary care providers (PCPs) from 2011 to 2015. Using a 2012 to 2017 sample of continuously eligible PCPs (the treatment group) and ineligible specialists with historically similar provision of billed services (the control group), this study is the first to examine how PCPs responded to the program's termination. Using inverse probability of treatment weighted difference-in-differences models that control for inter-temporal changes in provider-specific beneficiary characteristics, individual provider fixed effects, and zip code by year fixed effects, it finds that providers responded to the removal of the 10% bonus payments by increasing their billing of bonus payment eligible E&M relative value units (RVUs) by 3.7%. This response is consistent with supplier-induced demand and suggests a 46% offsetting response consistent with actuarial assumptions by the Centers for Medicare & Medicaid Services when assessing reimbursement reductions.

Changes in publicly and privately funded care in England following a national programme to reduce provision of low-value elective surgery.

This study assessed whether there is an association between changes in publicly and privately funded care for procedures classified as low value by the National Health Service (NHS) in England following implementation of the Evidence-Based Intervention (EBI) programme. Category 1 procedures should not be conducted and are no longer reimbursed by the NHS. Category 2 procedures are only reimbursed by the NHS in certain circumstances. Changes in volumes of publicly and privately funded procedures per month in 2019-2020 compared with the previous year were analysed in private hospitals and local healthcare markets, and adjusted for volume of procedures and patient case mix including age, sex, co-morbidities, and deprivation. Supplementary analyses focused on the self-pay and insurance funding mechanisms. There was a statistically significant association between changes in publicly and privately funded care for category 2 procedures at the hospital (-0.19, 95 per cent c.i. -0.25 to -0.12) and local healthcare market level of analysis (-0.24, -0.32 to -0.15). A statistically significant association for category 1 procedures only existed at the hospital level of analysis (-0.19, -0.30 to -0.08). Findings were similar for patients accessing care through self-pay and insurance funding mechanisms. Stronger associations between changes in publicly and privately funded care for category 2 procedures may exist as they are clinically indicated in certain circumstances. Reductions in publicly funded care were likely a combined result of the EBI programme and growing NHS waiting lists, whereas increases in privately funded care were influenced by both patient and supplier-induced demand.

Induced demand in kidney replacement therapy

There are three notable aspects of the current kidney replacement therapy program. First, the number of patients on home dialysis has dropped substantially over the last decades. Second, the rate of transplantation has stabilized in recent years. Third, there is variation in referral rate for transplantation among hospitals. These trends are the result of overutilization of in-center dialysis and that demand for kidney replacement therapy is moderated by suppliers.Current healthcare policy leads to overutilization of in-center dialysis and underutilization of home dialysis and transplantation. This overutilization is the result of supplier-induced demand and leads to suboptimal care for patients and excessive healthcare expenditures. The main drivers of this overutilization are the overcapacity of in-center dialysis beds and the high financial disincentives on empty dialysis beds. Policymakers should address this by reducing dialysis capacity and increasing the capacity of transplantation facilities.This is the first attempt to address the overutilization and the nonalignment of supply and demand by looking at the capacity of in-center dialysis and the financial disincentives for physicians on empty in-center dialysis beds. In our analysis, we conclude that limiting the capacity of in-center dialysis beds is the most effective strategy to better align supply and demand, which will result in better patient outcomes and lower societal costs.

Interrupted time series analysis for the impact of integrated medical insurance on direct hospitalization expense of catastrophic illness

In 2016, China initiated the merge of the urban resident basic medical insurance scheme and new rural cooperative medical scheme into one unified health insurance scheme: the urban and rural resident basic medical insurance. This study investigates the impact of integrated insurance on the direct hospitalization cost of inpatients with catastrophic illnesses. An interrupted time series analysis was conducted based on a sample of 6174 inpatients with catastrophic illness from January 2014 to December 2018. The factors surveyed included per capita total inpatient expense, out-of-pocket expense, and reimbursement ratio. Univariate analysis indicated that after the implementation of the unified urban and rural medical insurance, the reimbursed expense increased from 9398 to 13,842 Yuan (P < 0.001), average reimbursement ratio increased from 0.57 to 0.59 (P < 0.05). Expenses on both western and traditional medicines increased, although the proportion of medicine expense decreased after the integration. Interrupted time series analysis showed that per capita total inpatient expense and per capita out-of-pocket expense increased but showed a gradually decreasing trend after the integration. After the integration of urban and rural medical insurance, the average reimbursement ratio increased slightly, which had limited effect on the alleviation of patients’ financial burden. Furthermore, the integration effect on inpatient expense is offset by increased out-of-pocket medical expense due to suspected supplier-induced demand.

Pushy Patients Or Pushy Providers? Effect Of Patient Knowledge On Antibiotic Prescribing In Tanzania.

Antimicrobial resistance is one of the most serious threats to global health, but little progress has been made in reversing its spread. Inappropriate use of antibiotics in humans is a major driver of antimicrobial resistance, and rates are high and growing in lower- and middle-income countries. Antibiotics are thought to be subject to supplier-induced demand, whereby providers prescribe them to patients who do not know they are unnecessary. We conducted a randomized field experiment in 227 private health facilities in Tanzania, with standardized patients presenting uncomplicated upper respiratory tract infection symptoms. Standardized patients were randomly assigned to express knowledge (informed) or not (uninformed) that antibiotics were not required to treat them. There was a very high rate of inappropriate antibiotic prescription, with 86.0percent of informed standardized patients and 94.8percent of uninformed standardized patients prescribed an antibiotic, for an adjusted difference of 7.8percentage points between the groups. This small effect suggests that broader health systems factors are at play and that interventions should be aimed at systems, health facilities, and providers.

Unnecessary ultrasonography as supplier-induced demand in diagnosis of primary breast cancer in Iran: A cross-sectional study.

Supplier-induced demand (SID) refers to the concept that healthcare providers may deliver services that are not medically necessary to patients. An estimation of the extent to which this event has occurred can be insightful for policymaking and guiding health and insurance systems. This study aimed to investigate the extent of SID when performing a diagnostic ultrasonography for primary breast cancer patients and its relationship with socioeconomic factors in Iran. Data were obtained using questionnaires from 334 patients referred to the Cancer Research Center. To identify the patients who were candidates for undergoing a necessary diagnostic US, we employed the international clinical guidelines with confirmation of our expert panelists. With their assistance, a comprehensive index was created to screen those 'most probably affected by SID'. 55.9% had undergone an unnecessary diagnostic ultrasonography, and thus were most probably affected by SID. A significant association between socioeconomic factors (education, occupation, and supplemental health insurance) and SID was confirmed (p value≤0.001, 0.002, and 0.039, respectively). This study supports the SID hypothesis and the unnecessary demand for diagnostic ultrasonography in primary breast cancer. Also, our evidence indicates imposing excessive costs that can positively influence the policymakers' decision-making in the healthcare systems.

Healthcare utilization at retirement in China.

Previous studies, mostly analyzing data from high-income economies, present mixed evidence on the relationship between retirement and healthcare utilization. This study leverages administrative data for over 80,000 urban Chinese workers to explore the effect of retirement on outpatient and inpatient care utilization using a fuzzy regression discontinuity design. The analyses of medical claims from a large city in China complement and extend the current literature by providing evidence of potential mechanisms underlying increased short-run utilization. In this relatively well-insured population, annual total healthcare expenditures significantly increase primarily because of more intensive use of outpatient care at retirement, especially at the right tail of the distribution of outpatient visits. This increase in outpatient care appears to stem from a decline in the patient cost-sharing rate and the reduced opportunity cost of time upon retirement, interacting with supplier-induced demand, not from any sudden impact on health. We do not find evidence of change in inpatient care at retirement. The results hold for both females and males, and are robust to a number of sensitivity analyses.

Supply-induced demand for medical services under price regulation: Evidence from hospital expansion in China

In 2009, China launched a nationwide reform to overhaul its enormous healthcare system. Subsequently, government spending on healthcare increased significantly. Simultaneously, public hospitals experienced rapid expansion. This study empirically examines whether supply-induced demand existed for public hospitals during the expansion process, based on hospital longitudinal data from 2007 to 2016, which is matched with individual patient data. We found that medical expenditure increased rapidly, while the quality of medical services did not change significantly during the hospital expansion. In addition, due to the price regulation of medical services, public hospitals mainly passed on the costs of expansion by inducing hospitalization and diagnostic over-testing. Furthermore, supply-induced demand was more obvious in diseases for which doctors had more asymmetric information. Based on the evidence provided in this study, the expansion of public hospitals has resulted in a waste of healthcare resources and a rise in the healthcare burden on patients. This has certain implications for further deepening the reform of public hospitals.

An empirical evaluation of the physician offsetting response

ABSTRACT Using data on office visits for Medicare-treating physicians, this study examines the effects of several policy changes that reduced real reimbursement for some, but not all physicians, from 2012 to 2017. Using genetic propensity score weighted Difference-in-Differences (DID) models that include individual physician and county fixed-effects, this study finds strong evidence that those who experienced a reimbursement reduction increased their service provision, indicative of a supplier-induced demand response. Our estimates imply that 27–33% of a reimbursement reduction will be offset through changes in provider behavior.