A 2011 Health Services Research paper by Reschovsky et al. came up in the comments to Aaron’s post about single payer and wait times. I was unaware of the paper so I took a look. (If I’m not mistaken, it’s ungated.)
Among its findings is that provider supply has weak or insignificant association with resource use (cost, not spending). The authors claim that this is at odds with other Dartmouth work on supply sensitive care. That may be so, but let’s see if there’s any educational value in kicking the tires.
The Reschovsky work is at the individual level and the dependent variable is an overall cost measure. Supply sensitivity is an area-wide effect, and it arises with respect to use of specific health care services, not necessarily use overall. It doesn’t seem to me that it is inconsistent to find, on the one hand, use of some services (but not others) related to supply in a regional analysis and, on the other, that at an individual level, supply is not strongly related to overall cost. Another way to think of it is that, perhaps, some specialty services crowds out general practitioner use. If that’s the case, the effect on overall cost may be a wash. But that doesn’t mean some types of care aren’t supply sensitive, being over-provided to some populations and not others. I’m speculating here. What do you think?
The other thing I wonder about is whether their cost measure assumes away some of the potential supply sensitivity effect. They use a predicted cost measure meant to reflect resource use, not actual spending. Their method reduces the variance of the cost variable in a way that may conceal some important relationships. They say that using spending would instead introduce selection bias “because treatment efficiency will influence … a patient’s actual cost.” But isn’t that the point of the supply sensitive argument? We have health systems of varying efficiency, which is related to patterns of use. Again, I’m interested in readers’ thoughts.
There is, of course, a final issue that the authors can’t really do anything about. It’s a huge problem in health services research. It’s the assumption that diagnoses are exogenous. It doesn’t hold as much as we’d all like it to. That being the case, diagnoses as controls “over explain” cost, soaking up some of what would otherwise be considered a supply sensitivity effect. I have little doubt that diagnoses are supply sensitive just as much as care provision is. They share incentives, don’t they?