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Article Excerpt
Physician location decisions have long-lasting effects on the supply of health care available in a given market. Once a physician decides on his or her initial location, it is costly to relocate because acquiring a panel of patients and getting credentialed at area hospitals is time consuming for most physicians. Our study is aimed at understanding the factors affecting the choice of initial practice location by new physicians. Three aspects of the physician market are of particular interest: (1) the impact of malpractice insurance premiums, (2) state damage award caps, and (3) federal policies aimed at encouraging physicians to practice in underserved areas. The study of newly graduated physicians represents a distinct advantage over prior research, as understanding the factors that affect initial location choice for physicians is particularly important because of the long-lasting labor force implications of the decision.
The literature regarding physician practice location has shown that location and personal characteristics can influence the choice of practice location. A number of location factors and personal characteristics have been studied previously, including population density, hospital location, demographics, and financial factors (Newhouse et al. 1982; Escarce et al. 1998; Polsky et al. 2002). Krist et al. (2005) showed that Title VII funding for health professionals was significantly associated with the number of family physicians working in rural and low-income areas.
Previous studies, however, have not examined the relationship between location choice by new physicians and area characteristics such as malpractice insurance premiums and federal programs, nor have they looked at the potentially interactive effect on location choice of factors including personal characteristics, local characteristics, and malpractice insurance premiums. Considerable attention has focused on the role of malpractice insurance premiums in influencing physicians' decisions to continue to practice in particular areas, alter their medical treatment practices, and retire early; this situation has been termed a "crisis" in both the popular press and the scientific literature (see, e.g., Mello, Studdert, and Brennan 2003; Tabarrok 2006). Despite the widespread attention there has been little empirical research documenting the impact of recent increases in malpractice insurance premiums on physician behavior. An exception to this is work by Kessler, Sage, and Becker (2005) who found that state tort reform laws intended to restrict the growth of malpractice insurance premiums led to an increase in high-malpractice-premium specialty physicians due to reduced retirements and increased entry into practice. Along with unease regarding malpractice insurance premiums, concern has been raised regarding the inadequate supply of physicians in medically underserved areas. Despite federal and state government programs such as the National Health Service Corps (NHSC), which attempt to address the perceived maldistribution of primary and specialty physicians by encouraging physicians to work in underserved areas, research examining the impact of these federal programs is limited.
Previous studies often have been restricted to examining the "stock" of physicians in a given state or city as opposed to the "flow" of new physicians entering a given market. This limitation, consequently, makes it difficult to understand how physicians entering the field make choices regarding their practice locations. In addition, much of the prior research has used the AMA Physician Masterfile, which has some notable shortcomings. The AMA data do not adequately gather information on race and ethnicity, and they provide imprecise location information. Konrad et al. (2000), for example, found that the Masterfile overestimates rural physician supplies by 20 percent.
Our study uses a unique dataset to examine the factors affecting the practice location choice of new physicians. Our results indicate that higher malpractice insurance premiums do not appear to be a deterrent to locating in a particular area for obstetrician-gynecologists (OB/GYNs), though they appear to be a significant factor for surgeons. State malpractice damage award caps appear to attract high medical malpractice specialties such as OB/GYNs and surgeons. Health professional shortage area (HPSA) designation appears to attract only those OB/GYNs and primary care physicians (PCPs) without education debt, which would suggest that subsidy and loan repayment programs are not necessarily outweighing the perceived costs of locating in areas designated as underserved.
CONCEPTUAL FRAMEWORK AND ANALYTIC APPROACH
We model the choice of initial practice location using a random utility model (McFadden 1981). The utility, U, derived by individual physician i from choosing location j is given by
[U.sub.ij] = [beta] [X.sub.ij] + [[epsilon].subl.ij]; i = 1, 2, 3, ... I; j = 1, 2, 3, ... J (1)
where [X.sub.ij] represents a set of location attributes, [beta] is a vector of parameters, and [[epsilon].sub.ij] is an error term. Assuming that physicians choose the option for which each obtains the maximum utility, the probability that physician i chooses option j is Pr([U.sub.ij] > [U.sub.ik]) for all k [not equal to] j (Greene 2003). Put differently, we assume that utility has a random component leading to a probabilistic representation of individual choice behavior.
We use a conditional logit model to empirically estimate the random utility model. Hence we express the probability of individual i choosing option j as
[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] (2)
A well-known aspect of the conditional logit model is that individual-specific characteristics that do not vary over the location choice set are not identified in the model. Consequently, the effect of individual characteristics can only be estimated insofar as their effect might differ based on differences in area characteristics; such effects can be modeled by including interaction terms between individual characteristics and location characteristics. (1)
Because we observe location decisions for new cohorts of graduating residents over a 6-year period, we are afforded the opportunity to include metropolitan statistical area (MSA) fixed effects in order to control for numerous unobservable factors that might influence physician location choice. The presence of MSA fixed effects restricts the identifying variation of location attributes to changes within-location over time, which represents a stronger identification strategy but is also more demanding of the data as any time-invariant area effects are subsumed by the location fixed effect. One distinct benefit of MSA fixed effects is that, as we describe in the next section, our data come from medical resident surveys conducted at residency programs in New York State, a state that trains more physicians than any other. Because graduating residents are likely to remain in the same area in which they trained, regression models that do...
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