Discussion Papers 2020

CIRJE-F-1149 "Induced Physician-Induced Demand"
Author Name

Ikegami, Kei, Ken Onishi and Naoki Wakamori

Date April 2020
Full Paper PDF file
Remarks

Ikegami, Kei, Ken Onishi, and Naoki Wakamori: "Competition-Driven Physician-Induced Demand," Journal of Health Economics, Vol. 79, September 2021, 102488.

Abstract

Physicians may change their practices when introducing advanced medical equip-ment, and, in particular, they tend to overuse it. We investigate further in efficiency arising from physicians at surrounding hospitals. Using the panel data on the Japanese hospitals, we find that there exists a business-stealing effect: Hospitals lose their patients because of MRI adoption by nearby public hospitals, and, to compensate for the loss of patients, physicians take more MRI scans per patient. Our results suggest that the decision to adopt medical equipment needs to be made collectively rather than individually to avoid not only excessive adoption but also further physician-induced demand.