COLLAPSE Supplier-induced demand (SID) hypothesis states thatphysicians abuse their role as medical advisors to advance theirown economic self interests. Theses self-interest actions includeprescribing medical care beyond what is needed, and it can includeunnecessary follow-up visit and unnecessary surgery (SANTERRE).Patients depend on physician to give them the right advice and theright treatment but some feel that physicians are out for their owneconomic interests. Some feel that physicians, when faced with adecrease to their income because of the increase in physicians inthe area, will induce patients to demand more services based on thetrust that the patients have for them. And with the increase indemand for services, it will cause an increase in the price forservices, shifting the equilibrium back in the physicians’ favor.Physicians can also exploit the patient to consume more medicalcare because they have insurance that will pay, and it will causean increase to the income for the physician. The empirical evidenceregarding SID hypothesis from a study in 1978 from Fuchs, showssupport of the hypothesis. There was a 10% increase in the supplyof surgeons and it lead to a 3% increase in the per capita surgeryrate (SANTERRE). Even though Cromwell and Mitchell, Rossiter andWilensky and McCarthy had different percentages, it did show thatan increase in surgeons did have an increase in the surgery rate.But Escarce’s most recent findings did not support the SIDhypothesis. They found that an increase in the supply of surgeonsdid not have an impact on the surgeries performed. The differencesin the findings are believed to be because older studies tended torely on aggregated data that made it difficult to determine theextent to which variations in the consumption of physician servicescan be attributed to induced demand. The differences can also beattributed to change in managed care and controllable marketconditions, like time costs and price effects.

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