Should developing countries ban dual practice by physicians? Analysis under mixed hospital competition

Abstract

This paper examines a widely observed phenomenon of dual practice by physicians in many countries, where physicians employed in the public sector also work in the private sector, which is often in competition with the public provider that employs them. 1 Dual practice by physicians impacts the quality of healthcare that patients receive and has implications on the competition between the public and private hospitals and, ultimately, affects the overall welfare of a society. In the context of developing countries, physician dual practice, perhaps driven by a burgeoning private healthcare market arising from poor provision of public healthcare along with limited monitoring power of health authorities can be a significant issue. 2 At the heart of the matter are serious policy questions on whether dual practice by physicians under mixed competition is beneficial to society? Does it have negative impact on public health services? Should developing countries with limited regulatory and monitoring power be better off by restricting dual practice?To address these questions we develop a multi-stage game, where both public and private hospitals strategically compete for patients and talented physicians. Talented physicians have skills such as highly specialized training and expertise, significant experience and reputation, which leads to direct and substantial improvement in patient welfare. 3 This is relevant in the context of developing countries where quality of medical care vary across different hospitals and can often fall short. 4 Therefore talented physicians, with skills that improve patient outcomes, are in demand by both public and private sector hospitals. 5 We treat aggregate hospital quality as comprising of care provided by the talented physicians and general medical care (which includes hospital facilities, service of general physicians, waiting times, diagnostic tests, auxiliary medical care, among others). 6 Talented physicians choose the amount of service they provide in the public and private hospitals depending on the