The Production of and Market for New Physicians' Skill
Our understanding of the determinants of physician skill and the extent to which skill is valued in the marketplace is superficial. Using a large, detailed panel of new obstetricians, we find that, even though physicians' maternal complication rates improve steadily with years of practice, initial skill (as measured by performance in a physician's first year of practice) explains most of the variation in physician performance over time. At the same time, we find that the trajectories of new physicians' delivery volume develop in a way partially consistent with Bayesian learning about physician quality. In particular, as physicians gain experience, their volume becomes increasingly sensitive to the information in their accumulated prior.
This paper benefited greatly from input from Jeph Herrin, Jason Hockenberry, David Howard, Suhui Li, Sindhu Srinivas, and comments from participants in the 2012 American Society for Health Economists conference, the 2012 Annual Health Economics Conference, and the 2012 Southeastern Health Economics Study Group meeting, the Penn Health Economics Workshop, and other seminars at the University of Pennsylvania. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Andrew J. Epstein & Sean Nicholson & David A. Asch, 2016. "The Production of and Market for New Physicians’ Skill," American Journal of Health Economics, vol 2(1), pages 41-65.