Empirical Analysis of Supplier Induced Demand in Korea: Distinction between Induced Demand Effect and Availability Effect

Abstract

Background: Supplier induced demand (SID) indicates the case when doctors increase the demand of the patients, following their (physicians’) own best interests rather than patients’. This may occur when asymmetry of information exists between suppliers and consumers. This study aims to confirm whether SID exists in the Korean setting, particularly by dividing SID into both ‘induced demand effect’ and ‘availability effect.’ Methods: Induced demand effect and availability effect are differentiated following Carlsen & Grytten’s theoretical frame which divides doctor density regions into high and low ones. Results: Positive correlation between doctors’ density and utilization of their services was found, which could be interpreted as ‘availability effect.’ Conclusion: The result suggests that additional medical use for additional doctor, particularly in the area of low doctor density, can be interpreted to occur to meet the basic medical need of the people rather than as a result of unnecessary induced demand. It is important to make more medical doctors provided and to distribute them appropriately across the region in such a country like Korea where doctor’s density is relatively low.