Professional Uncertainty and the Problem of Supplier-induced Demand

This paper discusses the puzzling problem of large differences in per capita use of certain common surgical procedures among neighboring populations, which by all available measures are quite similar in need for and access to services. The evidence reviewed here supports the hypothesis that variations occur to a large extent because of differences among physicians in their evaluation of patients (diagnosis) or in their belief in the value of the procedures for meeting patient needs (therapy). This hypothesis, which we call the professional uncertainty hypothesis, is germane to current controversies concerning the nature and extent of supplier influence on the demand for medical services. It is also important because of its implications for health regulatory policy. Our plan is to (1) review the relevance of the hypotheses for the supplier-induced demand controversy; (2) review the epidemiologic evidence on the nature and causes of variation; (3) examine patterns of use of common surgical procedures to illustrate the importance of supplier influence on utilization; and (4) consider some of the implications of the professional uncertainty hypotheses for public policy.