Factors associated with induced demand for services in Iran’s healthcare system

Introduction

The provision of healthcare services is faced with serious challenges due to economic factors such as the adequacy or lack of financial resources, access to technology and medical equipment, and social determinants of health¹. Adverse selection, moral hazard and induced demand are three important phenomena that affect patients' behavior². Among these, induced demand is an issue that economists consider to have side effects and to affect interactions between patient and physician. Economic transactions generally involve two parties, a seller and a buyer. However, demand from patients (as buyers) in the health sector is mediated by other factors (i.e. physicians and sometimes healthcare agencies³. In fact, induced demand is defined as inducing caring for or providing and selling unnecessary services to clients of healthcare system that is accompanied with exercise of power by the service providers. This may result in providing services that do not have a positive impact on the health of the client⁴. The phenomenon of induced demand supplier; in other words, the information asymmetry between the service provider and the customer or service applicant in the healthcare market due to the poor knowledge of patients, the importance of health and concern over the consequences of diseases, clients tend to comply with the orders of the service providers⁵. For example, some patients assume that the services provided in hospitals are of higher quality than those in clinics, and prefer to be treated in hospitals even if treatment is available in clinics⁶. The assumption of asymmetric information between the physician and patient is the background for the induced demand theory⁷. The induced demand hypothesis emphasizes the motivations of doctors as healthcare providers to create induced demand⁸. The patients also affect the induction of demand as they have unlimited desire for, and tendency toward, services⁹. Moreover, economic incentives focused on insurance can affect patients’ behavior and the profit of healthcare organizations¹⁰. Many studies have confirmed physicians' induced demand, identified and investigated various supply and demand factors^11–15. A study by Bogg et al in India showed that the government's financial support has resulted in induced demand⁷. Recent studies also demonstrated the impact of physicians’ payment mechanisms on motivating health-seeking behavior in patients¹⁶. A study by Karimi et al showed that induced demand for medical and pharmaceutical services is more common among general physicians¹⁷. Cutler et al revealed a correlation between causes of induced demand from patients and physicians in providing services in different regions¹⁸. A study by Yuda showed that a 1% reduction in medical costs by the service providers could increase induced demand for services by up to 7.5%¹⁹. In their study in France, Delattre and Dormont showed that increasing the number of physicians relative to the population reduced the number of patients seeking medical advice/counseling; however, this reduction was minimal and a decline in the number of consulting physicians did not increase the volume of medical services sought²⁰. A study in Italy by Magazzino and Mele showed that the gross national product, unemployment rate, number of hospital beds, degree of urbanization and percentage of the population with high school education had a significant direct impact on health expenditure²¹.

The issue of induced demand is highly complicated due to the information asymmetry in medical services²². The possibility of induced demand and the severity of its effects are associated with interactions between a wide range of factors that affect patients’ behavior, including market, behavior, rules and regulations. These factors could act as incentives and disincentives for patients’ participation in or resistance against the phenomenon of induced demand⁴. Considering the extent of factors affecting induced demand and lack of a comprehensive study on this issue in Iran, the purpose of this paper is to examine the factors of knowledge and awareness of service providers, the personal interests of service providers, their sensitivity to health, the supervision of insurance companies, the industrialization of the health sector, the increase and diversity and the number of specialist forces and the quality of practices training to providers in hospitals.

Methods

Results

Overall, 511 subjects, who were working in emergency departments (17.9%), wards (71.5%), laboratories (6.8%) and clinics (3.8%), completed the questionnaire. The highest and lowest level of agreement with induced demand was recorded in the west (71%) and south (57.5%) of Iran, respectively. Moreover, 65.2% of the subjects in the whole country agreed with the existence of induced demand, while only 4.4% did not agree with the existence of induced demand. The chi-squared test showed no significant difference between different regions of the country (Table 2).

Most individuals with bachelors’ degree (67.7%) agreed with the presence of induced demand, while only 38.1% of specialists agreed with the presence of induced demand. However, there was no significant relationship between education level and induced demand.

Laboratory staff (73.1%) and physicians (55.1%) had the highest and lowest level of agreement with the existence of induced demand, respectively. Moreover, 68.1% and 3.8% of the nurses agreed and disagreed with the existence of induced demand, respectively. Furthermore, 57.1% and 4.4% of the radiology technicians agreed and disagreed with the existence of induced demand, respectively. Chi-square test showed no significant relationship between induced demand and job categories (P=0.194).

The results also showed that women (69.4%) agreed significantly more with the existence of induced demand than men (53.8%) (Table 3). The results of this study indicate that 64.9% of the subjects believed that sensitivity of clients toward their own health affected the incidence of induced demand. In addition, 62.1% of the subjects believed that the monitoring and planning of insurance companies affected the incidence of induced demand. Kruskal-Wallis test showed a significant relationship between induced demand and its related factors (Table 4).

Discussion

The results of the present study showed that the majority of participants (65.2%) agreed with the existence of induced demand, which is consistent with previous studies^11–15. Bogg et al showed that the government’s financial support has led to induced demand⁷ In Japan, Sekimoto and Ii studied the supply and induced demand for chronic diseases, and reported an increase in induced demand for hypertension and diabetes²⁴. The findings of Crivellei et al. in Switzerland²⁵ Delattre and Dormont in France²⁰ were in line with the results of this study. However, a study in America showed no correlation between demand for services and services provided by physicians through Medicare²⁶. A study by Amporfu indicated that salaried physicians have no incentive to induce demand²⁷. Although few studies strongly reject the existence of induced demand, some experts believe that identification and determination of the incidence of induced demand are health economics issues due to the complexity of treatment, medical decisions, clinical uncertainty and modernization of health needs. It is not simple to distinguish between real demand and induced demand. In this regard, Richardson and Peacock claimed that medical decision-making is often complex and uncertain even if all medical standards were met²⁸. Lien et al also stated that the development of needs, epidemiological changes and diversity of tastes have further complicated patient diagnosis and treatment, and the distinction between real and induced demand²⁹. It seems that the implementation of healthcare reform in Iran and significant reductions in patients’ out-of-pocket payments have resulted in increased demand for services. This issue is not observed in countries with more stable healthcare system. On the other hand, cultural differences and health beliefs affect the amount of demand in different regions.

Induced demand occurs because of multiple economic and structural factors²². The present study found a significant relationship between induced demand and the related factors of knowledge and awareness of service recipients, sensitivity of clients toward their own health, monitoring and planning of insurance companies, personal interests of service providers, industrialization of the healthcare sector, increases in the variety and number of specialists, knowledge and awareness of service providers, quality of education models and training methods for service providers. Leone conducted a study in three provinces of India in 2014, which indicated the role of several factors in induced supply and demand³⁰. The present study is also in line with a study by Keyvanara et al, which demonstrated factors such as the role of supplemental health insurance, lack of strict supervision on insurance companies, increased profit of equipment companies, diagnostic centers, pharmaceutical companies, the over-trusting of physicians, incorrect demands of patient from the physicians, lack of awareness, patients’ free access to physicians, patients’ willingness to make greater use of free services and franchising affect the incidence of induced demand⁴. Bazyar et al indicated inadequate supervision on the insurance system as the main cause of induced demand³¹. A study conducted in China reported that the high percentage of cesarean sections is due to the decision of pregnant women. However, the physicians’ impact on the increased demand for cesarean section cannot be ruled out³². This imbalance between clients and physicians' knowledge may result in the physicians’ tendency to provide questionable services³. A physician has the expertise and knowledge to have a dual role of a consultant and service provider for the patient³³. Borhanzade claims that poor monitoring and control by insurance companies on the payment system leads to easier demand for excess services³⁴. The findings of other studies indicate that consumers compensate for the increased costs of healthcare by using supplemental insurance³⁵. Madden et al believe that different methods of payment affect the professional behavior of service providers³⁶. According to a study by Dosoretz, physicians and other providers maximize their benefit when clinical values are not defined³⁷. The difference between the results of this study and those of other studies is due to the focus of other studies on methods of payment to physicians and other components of health economics, whereas the present study emphasized more on social factors, knowledge, attitude, commitment to medical ethics and insurance company monitoring. Authorities and decision-makers in the healthcare sector should aim to increase public awareness about diseases and treatment processes, and offer appropriate solutions to increase physicians’ occupational commitment by changing the medical education system. In the meantime, other interfering factors in increased demand such as payment methods, performance of public and supplementary insurances should be monitored closely. In this regard, the mass media could be helpful in raising public awareness and modifying pubic beliefs.

The present study showed that the industrialization of the healthcare sector and an increase in the variety and numbers of specialists are effective on induced demand. Nowadays, market competition has been created between the providers of healthcare services. Ferguson demonstrated that induced demand results from the increasing role of the market in medical care³⁸. Economics is the most important factor affecting the medical institutions, which use induced demand as a means of increasing profits. An increase in unnecessary services leads to increased profit, and even distribution of money between various providers³⁹. Bhatia emphasizes that the pharmaceutical market is highly competitive, and each company is constantly marketing to maximize their revenue⁴⁰. Palesh et al claimed that market forces such as advertising are significantly effective on the unnecessary use of technology. Moreover, advertisements of importers and manufacturers increase demand⁴¹. However, Bickerdyke et al suggest that induced demand is influenced by the patient's goals (including good health, vitality, longevity, information, autonomy, usefulness of process, regular source of care, confidence, access to benefits of social security or insurance payments and pain relief), medical history and environmental factors (including financial situation, family/work commitments, cultural background and attitude of the society)⁴². Nevertheless, it seems that this previous study was patient-centered, and mostly focused on the quality of services rather than social and economic aspects.

Data availability

Dataset 1. Responses of all participants to all questions. DOI: 10.5256/f1000research.14377.d201598²³