Author(s): Roger Lee Mendoza1
Unlike many other countries, only 19% of physicians remain independent or solo practitioners in the United States. This study seeks to determine if entry barriers to solo practice exist in physician services markets with a predominantly suburban patient base. Any entry barrier will play a critical role in a wide variety of competition and income-related issues in these markets.
MATERIALS AND METHODS
This study hypothesizes that substantial deterrence to entry is present in suburban settings where physician competition is typically much less than metropolitan areas. Information about their competitive position was obtained from solo primary care physicians (PCPs) and specialists in southern New Jersey municipalities. Two-sample t - tests (α =0.05) ascertained whether the means differences of these two groups are statistically significant for the population from which they were sampled. Regression coefficients were computed for the magnitude of differences in barrier impact between samples.
Adapting the Orr model, E = ß0 eß1(πp -π*) eß 2Q. Sß3 μ, to this study allowed us to estimate the overall height of entry barriers to suburban solo practice. The study finds that entry barriers tend to have moderate effects on PCPs, with the exception of legal and regulatory compliance which are just as burdensome to specialists. Risk and insurance, capital, advertising, research and development (R & D) as well as market concentration are far more challenging to solo specialists mainly due to overuse of already costly tests, procedures, and medications by specialists for "defensive medicine," and heavy reliance on specialists by PCPs. Labor costs are associated with several barriers.
Despite their declining population, market entry (and presumably survival) of solo physicians is not as straightforward of a phenomenon as conjectural and anecdotal evidence might suggest. Medical specialty offers an explanatory variable. Specialists opting to go solo might consider whether they possess certain competitive advantages relative to large group practices in their field. In view of these considerations, the hypothesis of this study is qualified to account for the statistical significance of field of practice and substantial differences in overall barrier height for solo practitioners in suburban areas.
Barrier Height, Competitive Advantage, Economies-of-Scale, Medical Specialty, Physician Services Markets, PCPs, Suburban.