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Competition, Prices and Quality in the Market for Physician Consultations†
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This research was supported by funding from Australian Research Council Discovery Grant DP110102863. MABEL is supported by a National Health and Medical Research Council Health Services Research Grant (454799) and the Commonwealth Department of Health and Ageing. We thank the doctors who gave their valuable time to participate in MABEL, and the other members of the MABEL team. The views expressed are those of the authors and not necessarily those of the funders. We are grateful for suggestions from the Editor and two referees, and for comments received at presentations in the Department of Health Policy and Management, Harvard School of Public Health; the Health Econometrics and Data Group, University of York; the Health Economists' Study Group conference, June, 2012; the Network of Industrial Economists conference on competition in healthcare markets, December, 2012; and the CAER Health Economics Workshop, University of New South Wales, January, 2013.
Abstract
Prices for consultations with General Practitioners (GP's) in Australia are unregulated, and patients pay the difference between the price set by the GP and a fixed reimbursement from the national tax-funded Medicare insurance scheme. We construct a Vickrey-Salop model of GP price and quality competition and test its predictions using individual GP-level data on prices, the proportion of patients who are charged no out-of-pocket fee, average consultation length, and characteristics of the GP's, their practices and their local areas. We measure the competition to which the GP is exposed by the distance to other GP practices and allow for the endogeneity of GP location decisions with measures of area characteristics and area fixed-effects. Within areas, GP's with more distant competitors charge higher prices and a smaller proportion of their patients make no out-of-pocket payment. GP's with more distant competitors also have shorter consultations, though the effect is small and statistically insignificant.