SID in Healthcare

The asymmetry of information between supplier and consumer begets Supplier Induced Demand (SID). In this rapid evolving health sector, the doctors have taken the role of service providers or supplier of health service, and patients have become clients or health service consumer.

In this market dynamics the doctors’ (service provider) practices lead toinappropriate and unjuSID 1stifiable demand for health care among the patients. This becomes even worse in a health care system where people pay out of pocket (OOP) for a considerable proportion of the health expenditures. Take example of INDIA, a developing nation and World’s second most populated country, the OOP is 85.9% (GHO, 2012).

Reason(s) of SID:

Income elasticity of demand for healthcare is around one.
The demand for healthcare is rising due to aging of the population. Whereas the number of service provider, doctor, is limited.
Doctor patient ratio is very low in developing country. (In INDIA, Physician ratio 0.7/1000 population, by WHO-2012)
Lack of access to information for the common people.
Structural changes of remuneration system by hospitals to physicians. Recently hospitals introduces FFS (Fee-For-Service) model for physician.
High percentage of OOP
Large number of medical malpracticesSID 4

Impact(s) of SID:

Un-even distribution of wealth.
Allocation of time between work and leisure got changed. People are forced to trade-off leisure to earn stoke for living.
People are trading-off investment or expenditure between health and non-health resources.
SID is the one among the most important factor that forces people to spend more than half of their income on medical expenses and pushes into poverty.

Path to reduce the impact(s):

Increase knowledge dissemination in a structured way for those who do not have access to information.
Strictly follows evidence based medical practice by physician and other service providers.
Introduction of better monitoring system and regulatory body by government.
Government of developing country need to increase GDP spend on public health (GDP spent in India is around 4.0% in 2013 on public health; by World Bank).