Geographic Variation in Healthcare Utilization: The Role of Physicians

The authors study the role that physicians play in driving the large regional variation of US healthcare utilization. The researchers estimate a simple model that separates variation in average utilization of Medicare beneficiaries due to physicians, non-physician supply side factors, and patient demand. The model is identified by the migration of patients and physicians across regions, as well as by variation in within-region matching. The authors find that physicians vary greatly in the intensity with which they treat otherwise similar patients, and that at least a third of regional differences in healthcare utilization can be explained by differences in average physician treatment intensity. Conservatively, physicians are three times as important as non-physician supply-side factors in explaining geographic variation. Around three-fifths of physicians’ role comes from differences across regions in physician practice styles within the same specialty, while the other two-fifths reflects differences across regions in physician specialty mix.