Supplier Induced Demand - Variations in Care and SID

Variations in Care and SID

It is unclear the extent to which SID explains geographic variations in care. It is a complicated topic. It is difficult to know how much is done explicitly to raise a physician's income and how much is practice style or professional uncertainty. Physicians who are more entrepreneurial may be interested in maximizing income. Surgeons may have more opportunity to manipulate demand. They may be more enthusiastic about certain procedures they perform because they generate more revenue or because they value the surgical treatment.

Overutilization The simple adage, "if you build it they will come," applies to SID and the medical profession. It appears when resources are available, overutilization occurs even when improved quality and outcomes are uncertain. This occurs daily in hospital intensive care units, at primary care physician offices and with overutilization of expensive radiologic technology and laboratory testing. "Research suggests that those who invest in imaging equipment order more CT and MRI tests than doctors who haven't made the investment." Analysts report that physicians reflexively respond to receiving positive test results by ordering more tests. Variation in medical practices can result in SID without producing increased quality outcomes. When standardized treatment pathways are unavailable to agents and principals a degree of uncertainty exists resulting in increased requests for unwarranted services. As a result, overutilization of supplies and services may occur without evidence of improved quality.

Due to the number of contributing factors for the consumption of healthcare resources, it is difficult to isolate instances of supplier induced demand. However, there are many reasons for SID in healthcare that are important to understand including reimbursement rates, competition, physician incentives and practices. Increased levels and costs of technology, as well as changing practices and the lack of evidence based medicine or defined standards of care allow more room for supplier induced demand. To further elaborate, take the example of PSA (prostate specific antigen) testing and early stage prostate cancer. Published guidelines have varied over the past few decades enough to cause doubt in a true standard of care. With a number of treatment options including minimal to no healthcare interventions (watchful waiting, active surveillance, surgery, radiation therapy, etc.), patients may be influenced by providers to consume more healthcare than they would have otherwise given the asymmetry of information and marketing of treatment options from hospitals, physicians and industry. Externalities which influence supplier induced demand include direct to consumer marketing and patient susceptibility to marketing to the extent that demand induced supply is now being documented in health economics.