The "supply hypothesis" and medical practice variation in primary care: testing economic and clinical models of inter-practitioner variation

Soc Sci Med. 2000 Feb;50(3):407-18. doi: 10.1016/s0277-9536(99)00299-3.


Medical practice variation (MPV) is marked, apparently ubiquitous across the health sector, well documented, and continues to be a focus of professional and policy interest. MPV have stimulated two paths of investigation, one economic in emphasis and the other more-clinical in orientation; while health economists have stressed the potential role of income incentives in medical decision-making, health services research has tended to emphasise clinical ambiguity as a factor in practitioner decisions. Both sets of explanations converge in an implicit "supply hypothesis" that posits contextual practitioner and practice attributes as influential in clinical decisions. Data on inter-practitioner variation are taken from a large and representative regional survey of general practitioners in New Zealand, a country in which unsubsidised fee-for-service is the predominant mode of remuneration in primary care. The paper assesses the impact on three important areas of clinical decision-making prescribing, test ordering, request for follow-up -- of three key conceptual dimensions -- income incentives, physician agency, and clinical ambiguity (operationalised as local doctor density, practitioner encounter initiation, and diagnostic uncertainty respectively). Predictions are made about inter-practitioner variations in the rate of clinical activity in the three areas. The results of the analysis using multi-level statistical techniques are: 1. the extent of competition -- local doctor density -- seems to have no effect on the pattern of clinical decision-making; 2. doctor-initiated visits are, if anything, associated with lower rates of intervention; 3. diagnostic uncertainty is associated with higher rates of investigations and follow-up, both of which have clinical plausibility; 4. there is no significant interaction effect between density and uncertainty. It is concluded that, for the clinical activities studied and for the practitioner attributes as operationalised in this investigation, a clinical, rather than an economic, model of practitioner decision-making provides a more plausible interpretation of inter-practitioner variation in rates of clinical activity in general practice. The "supply hypothesis" requires further analytical refinement and empirical assessment before it can be applied as a generic explanatory framework for MPV.

Publication types

  • Research Support, Non-U.S. Gov't
  • Review

MeSH terms

  • Family Practice / organization & administration
  • Female
  • Health Care Surveys
  • Health Services Needs and Demand*
  • Humans
  • Male
  • Models, Theoretical
  • New Zealand
  • Observer Variation
  • Physicians / supply & distribution
  • Practice Patterns, Physicians' / organization & administration*
  • Predictive Value of Tests
  • Primary Health Care / economics
  • Primary Health Care / organization & administration*