Health Care

Geographic Variation in Healthcare Utilization: The Role of Physicians

Discussion Paper

Ivan Badinski, Amy Finkelstein, Matthew Gentzkow, Peter Hull, and Heidi Williams

July 2023

The authors study the role that physicians play in driving the large regional variation of US healthcare utilization. The researchers estimate a simple model that separates variation in average utilization of Medicare beneficiaries due to physicians, non-physician supply side factors, and patient demand. The model is identified by the migration of patients and physicians across regions, as well as by variation in within-region matching. The authors find that physicians vary greatly in the intensity with which they treat otherwise similar patients, and that at least a third of regional differences in healthcare utilization can be explained by differences in average physician treatment intensity. Conservatively, physicians are three times as important as non-physician supply-side factors in explaining geographic variation. Around three-fifths of physicians’ role comes from differences across regions in physician practice styles within the same specialty, while the other two-fifths reflects differences across regions in physician specialty mix.