COLLAPSE Supplier-induced demand (SID) hypothesis states that physicians abuse their role as medical advisors to advance their own economic self interests. Theses self-interest actions include prescribing medical care beyond what is needed, and it can include unnecessary follow-up visit and unnecessary surgery (SANTERRE). Patients depend on physician to give them the right advice and the right treatment but some feel that physicians are out for their own economic interests. Some feel that physicians, when faced with a decrease to their income because of the increase in physicians in the area, will induce patients to demand more services based on the trust that the patients have for them. And with the increase in demand for services, it will cause an increase in the price for services, shifting the equilibrium back in the physicians’ favor. Physicians can also exploit the patient to consume more medical care because they have insurance that will pay, and it will cause an increase to the income for the physician. The empirical evidence regarding SID hypothesis from a study in 1978 from Fuchs, shows support of the hypothesis. There was a 10% increase in the supply of surgeons and it lead to a 3% increase in the per capita surgery rate (SANTERRE). Even though Cromwell and Mitchell, Rossiter and Wilensky and McCarthy had different percentages, it did show that an increase in surgeons did have an increase in the surgery rate. But Escarce’s most recent findings did not support the SID hypothesis. They found that an increase in the supply of surgeons did not have an impact on the surgeries performed. The differences in the findings are believed to be because older studies tended to rely on aggregated data that made it difficult to determine the extent to which variations in the consumption of physician services can be attributed to induced demand. The differences can also be attributed to change in managed care and controllable market conditions, like time costs and price effects.

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