Physician Compensation Specialists Supply of Medical Services

Shortage! Shortage!…Shortage???

In the news, you often hear that there are shortages of nurses and physicians.  We need more nurses and physicians, right?  According to an editorial by Laurence Baker in Health Services Review, we should be a little skeptical of calls for more and more healthcare providers.  If supplier-induced demand is a problem, more providers will only increase the amount of medical care provided.  For instance:

  • Bunker (1970) found that in 1967, “there were 39 surgeons per 100,000 persons in the United States, and less than half as many—18 per 100,000—in England and Wales. America, he also found, had a much higher rate of surgery, about 7,400 surgeries performed per 100,000 people in 1965, about twice the 3,770 reported for 1966 in England and Wales.”
  • Fuchs (1978) “estimated that 10 percent increases in the surgeon/population ratio resulted in about a 3 percent increase in per capita utilization of surgeries.”
  • Sloan and Schwartz (1983) concluded that a 10 percent increase in the supply of physicians would be associated with a 4 percent increase in spending for physician services.”
  • Fisher et al. (2003 a, b) “…argued that in the Medicare program, having more specialists per capita in an area is associated with higher surgery rates and higher procedure rates.”
  • Baicker and Chandra (2004) showed that states with the more specialists tend to rank lower in quality than states with fewer, and vice versa for generalists.”

Does expanding supply the of physicians unambiguously improve health care quality?  No.  It is likely that increasing the supply of primary care physicians will increase quality and increase cost at a slower rate.  On the other hand, an increase in the supply of specialist may or may not improve quality and will almost certainly increase costs.  Increasing the supply of physicians may improve health care system, but it should not be dogma that this is always the case.


  1. I’ve been reading that people are interested in going into the nursing field but there’s an issue with getting people from point A to point B because there is such a shortage of educators. The shortage of nursing teachers creates nursing programs with long waiting lists. Many of today’s nurses are getting older and are ready to retire. With a lack of education staff in the industry, one noteworthy reason for the shortage seems to be the wait time between learning and practicing. Our population is aging as well and nursing homes need nurses, but nursing graduates tend to prefer hospital work over nursing home work. Nursing home nurses need significant knowledge in technology because technology is what is often used to extend the lives of the nursing home residents. So, when talking about a shortage, it’s also important to talk about health care educators.

  2. You should watch “The Power of Community”, a DVD available from

    It shows how the cost of healthcare in Cuba was handled when Russia pulled all of its support in 1990 with the collapse of the Soviet Union. They went from 3 universities to over 50 universities, spread around the country. They soon began EXPORTING doctors in exchange for oil.

    Think about it: doctors as a commodity. We’ve got plenty of people sitting around with nothing to do and nowhere to go.

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