Strategic Interaction between General Practitioners and Specialists: Implications for Gatekeeping

Abstract

We propose to estimate strategic interaction effects between general practitioners (GPs) and different specialist types to evaluate the viability threat for specialists associated to the introduction of a mandatory referral scheme. That is, we show that the specialists' loss of patientele when patients can only contact them after a GP referral has important consequences for the viability of the specialist types whose entry decisions are strategic substitutes in GPs entry decisions.

To estimate the strategic interaction effects, we model the entry decisions of different physician types as an equilibrium entry game of incomplete information and sequential decision making. This model permits identification of the nature of the strategic interaction effects as it does not rely on restrictive assumptions on the underlying payoff functions and allow for the strategic interaction effects to be asymmetric in sign. At the same time, the model remains computationally tractable and allows for sufficient firm heterogeneity.

Our findings for the Belgian physician markets, in which there is no gatekeeping, indicate that entry decisions of dermatologists and pediatricians are strategic substitutes in the entry decisions of GP's, whereas the presence of gynecologists, ophthalmologists and throat, nose and ear-specialists has a positive impact on GP payoffs of entry. Our results thus indicate that transition costs are likely upon the implementation of gatekeeping and that these costs are mainly associated to the viability of dermatologists and pediatricians.

Keywords: entry, strategic interaction, GP's, specialists, gatekeeping

JEL Classification: I11, L10