Prescribing behavior of general practitioners: Competition matters!

Background
General Practitioners (GP) have limited means to compete. As quality is hard to observe by patients, GPs have incentives to signal quality by using instruments patients perceive as quality.

Objectives
I investigate whether GPs prescribe more units when confronted with more competition. As there is no monetary benefit in doing so, this type of (perceived) quality competition originates from GPs satisfying patients’ expectations.

Method
Market level data on per capita and per contact number of items prescribed by GPs is studied for the Belgian market of General Practitioners. I hypothesize that GP competition has a positive impact on the prescribed volume, after controlling for medical needs and GP characteristics. Properly controlling for medical needs implies the use of a two-stage linear regression model.

Findings
The analysis indicates that a higher number of GPs per capita results in a higher number of units prescribed by GPs, both per capita and per contact. This is consistent with quality competition in the GP market, while inconsistent with alternatives explanations (GP scarcity, GP inducement and GP dispersing prescription in time).

Conclusion
GPs prescribe more units when there is more competition to satisfy patients’ expectations. The paper thus presents empirical evidence of (perceived) quality competition.