This study tests the physician-induced demand (PID) hypothesis by examining the effect of competition, measured as an increase in district-level doctor-to-population ratio, on the provider-level quantity and intensity of medical care used by hypertension patients in Ghana.
The study uses monthly data of administrative claims spanning 2016–2019 and employs an instrumental variable approach to address the potential endogeneity of the doctor-to-population ratio due to omitted factors such as travel time and health knowledge.
The study finds that outpatient visits and treatment intensity increased by 22 and 24%, respectively, in response to increased physician density, consistent with demand inducement. Furthermore, the results suggest that not-for-profit providers may have equal or greater incentives to induce demand, contrary to general belief.
The evidence suggests that healthcare costs may be higher than necessary, which has significant policy implications. The findings call for policy measures that discourage the use of low-value care without compromising patient health.
This study makes valuable contributions to the existing literature on demand inducement and physician behaviour by presenting new evidence from Ghana’s healthcare system. While previous studies focus on for-profit providers, this study focuses on not-for-profit providers. Furthermore, unlike most previous studies that examined PID under a prospective payment system (DRG) in an inpatient setting, this study demonstrates that significant PID can exist under DRG in an outpatient setting. It is among the few that attempted to address the challenge of endogeneity in PID studies.
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2024-0146.
