1、OutlineThe training of physiciansMedical school&residencyReturns to medical trainingWork hoursBarriers to entryPhysician agencyPhysician-induced demandDiscriminationThe training of physiciansMedical schoolEntry into med school is competitive and selective worldwideIn the US,average 50%of applicants
2、are accepted into at least one schoolLength of medical school varies across countryUS&Canada applicants must first get a bachelors degreeEuropean applicants go directly from high schoolMedical school can be super-expensive US:$140k-$225k for four yearsEuropean medical training often heavily subsidiz
3、edResidencyIn addition to classroom work,physicians-in-training must also gain hospital experienceResidency is a period of on-the-job training following medical schoolNew residents lack experience,and when new residents arrive at a hospital,empirical evidence that medical errors go up“July effect”in
4、 the US“August killing season”in the UK Physician work-hoursWork hoursOver 60 hours a weekOn call residents could work up to 30 consecutive hoursIn 2003,implementation to limit number of hours/week for US doctorsNo more than 80 hours a weekNo change in patient mortalityMany residents still work over
5、 80 hours a week,but report only 80 hoursWork-hour tradeoffsLonger work-hoursFatigue may impair physicians cognitive abilities and in turn may affect patient healthShorter work-hoursRequires more hand-offs by physicians and thus greater chance for errorEmpirical question which effect dominates Short
6、er hours leads to fewer errors Randomized experiment at Brigham and Womans ICU at Harvard(2004)2 groups:traditional hours(80 hours/week)&short work week(60 hours/week)Traditional hour groupCommitted 36%more serious medical errors21%more medication errors5.6 times more diagnostic errorsSenior physici
7、ans intercepted most serious errorsReturns to medical trainingReturns to medical trainingUnlike most occupations,returns to medical training are very back-loadedMedical school&residency expensive in direct costs and opportunity costsSo those who choose being physician are patient enough to value fut
8、ure returns Net present valueNet present value is a way of calculating value of all future streams of income(from todays perspective)Discount factor is a measure of how much less an individual values future income over present income lies between 0 and 1;small if impatient and large if patientThose
9、with high have high NPV from being a physicianThose with low have low NPV(and maybe even negative NPV)Discount factorAnother way of expressing discount factor is:Where r is the discount rate,analogous to the market interest rate that would make a person with discount factor indifferent between savin
10、g for tomorrow and spending todayEx:=0.90 corresponds with r=0.11 Very patient have high discount factors and low discount rates r=1/(1+r)Internal rate of return(IRR)Consider two possible career choices P and C with incomes paths Ip and IcInternal rate of return r*is the discount rate which equalize
11、s the NPV of both careers(or the difference between NPV(p)NPV(c)=0)Someone with IRR of r*values career P and career C exactly equally Internal rate of returnIRR in medicine is typically between 11%and 14%!Significantly higher than market interest rateThis is true for dentists and lawyers tooIRR may
12、be even higher for medical specialists like neurosurgeons and immunologists The fact that the IRR has stayed high is curiousSuggests that being a physician is highly lucrativeWhy hasnt that attracted more physicians,which would have pushed the IRR back down to market levels?Barriers to entryBarriers
13、 to entry may explain the high IRRIn 19th century,becoming a doctor was simpleAnyone could do it,no regulation about trainingAmerican Medical Association(1847)Pre-reqs for medical school4 years medical schoolRequire doctors to have a license to practice1910 Flexner Report helped shut down low-qualit
14、y med schoolsResult:less med schools and less med studentsMore barriers to entryCaps on medical school class sizeDoctors need license to practice on their ownInternational med graduates Long and arduous process to practice in the USNurses and Physician AssistantsLimited in scope of practiceAlternati
15、ve medicineChiropractors,acupuncturists,etc.need licensure tooTradeoffs from barriers to entryBecause of barriers to entry,consumers have to pay above the competitive pricePhysicians therefore earn monopoly rentsDef.wages above the competitive price due to artificial constraint of the market Barrier
16、s to entry ensure that physicians are qualifiedPhysician agentsPhysicians as agentsPatients trust physicians to act as perfect agents for their healthDoctors foremost concern should be patients well-beingNot their own financial status or reputationAre doctors always perfect agents for their patients
17、?Physician-induced demand(PID)Information asymmetry between doctor and patientPatients cannot assess whether an extra test or procedure ordered by doctor is necessary Financial incentive for doctors to prescribe more services than neededEmpirical evidence that when reimbursement rates for various pr
18、ocedures change,doctors prescription practices also change Defensive medicineDefensive medicineOverutilization of testing and servicesProtects against malpractice lawsuitsDoctors fearful of lawsuit may overprescribe(and overcharge)for only marginally-useful proceduresMello et al.(2010)estimate that
19、medical liability system in the US costs$55.6 billion annually Racial discriminationTypes of discriminationTaste-basedPreferential treatment for certain groups of patientsConscious or unconsciousStatisticalStereotypes on biology or behavioral tendenciesDiscrimination can be efficient or inefficientS
20、ome discrimination may harm patients,but others may benefit themEvidence of discriminationAudit study(Shulman et al.1999)Fictional patient historiesBlack and white actorsPatients told doctors same script,background,and hand motionsOnly difference was the race of“patient”/actorResultsPhysicians less
21、likely to recommend standard treatment if patient was blackTaste-based or statistical discrimination?Efficient of inefficient discrimination?Efficient discriminationTaste-based is always inefficientStatistical may be efficientEfficient if medical evidence to treat racial groups differentlyEx:optimal
22、 hypertension treatment is different for blacks than for whitesConclusionPhysician supply highly regulatedLeads to a shortage of doctorsHard for other health care providers to fill the voidInvestment returns to being a doctor and specializing is very highPhysicians are not always perfect agents of careOverutilization of carePhysician-induced demand and defensive medicineRacial discrimination
