The Role of Asymmetric Information in Induced Demands: A Case Study of Medical Services

According to physician-induced demand (PID) hypothesis, a physician can induce a patient to undergo more intensive medical treatment based on the fact that the physician has more medical information than the patient. Investigations demonstrated that non-salaried physicians have more incentives to motivate the patients to use unnecessary health care services. In this paper, PIDs of staff and non-staff physicians have been compared. 300 questionnaires were completed by physicians living in Tehran. 70 of these questionnaires were omitted from the study since the related respondents were staff and had private offices simultaneously. Visit length and the average number of tests for each patient were considered as the dependent variables while the patient’s gender and age as well as the physician’s degree, years of experience, preference for income to leisure, and performing special services were the explanatory variables. Logit model was used for data analysis. In general, average number of tests and visit length depended significantly on patient’s age and gender. However, in the case of the non-staff physicians, preference for income to leisure, years of experience, and doing special services affected the number of the tests and visit length for the patients. It was also found that general physicians tend to induce more demands for using health and treatment services than non-staff physicians. To lessen the unnecessary health care expenses induced by non-staff physicians, it is recommended to enact new laws to supervise the performance of these physicians.