The impact of consumer health information on the demand for health services

Abstract

This paper empirically examines whether consumers use health information, from non-physician information sources, as a substitute or complement for health services – namely for physician visits and emergency room (ER) visits. An indicator of patient trust in physicians is developed and used as a proxy for potential unobserved heterogeneity that may drive both consumers’ propensity to seek information and to use physician services. The results, after correcting for sample selection bias and controlling for unobserved heterogeneity, concur with the literature, that consumer health information increases the likelihood of visiting a physician as well as the frequency of visits on average. However, low-trust consumers tend to substitute self-care through consumer health information for physician services. Further, better-informed consumers make significantly fewer ER visits suggesting that information may be improving efficiency in the market.

Introduction

Uncertainty as to the quality of the product is perhaps more intense here than in any other important commodity… Because medical knowledge is so complicated, the information possessed by the physician as to the consequences and possibilities of treatment is necessarily very much greater than that of the patient, or at least so it is believed by both parties. Further, both parties are aware of this informational inequality, and their relation is colored by this knowledge. [Arrow, 1963, p. 951]

Imperfect information has been cited as the key source of market failure in the health care sector, by Arrow (1963) and others (Hurley, 2000, Kenkel, 1990). In this passage Arrow introduces the notion of asymmetric information and its impact on the “doctor–patient” relationship where doctors must serve as agents for their less informed patients. And implicit in this arrangement is some degree of trust that must occur between physicians and their principles – namely their patients. The importance of the doctor–patient relationship is well documented as an important attribute of consumer choice and how health care resources are allocated. Holding all else constant, this model of resource allocation inherently places much of the decision-making power on the physician, so that efficiency evaluation comes from understanding the objectives driving physician behavior. In the principal–agent framework, physicians incorporate the utility of their patients in their own profit maximizing objective function (McGuire, 2000). These two objectives in a physician's model of behavior may at times offset each other depending on market incentives and payment systems so that the efficiency of final outcomes is unclear from a social welfare perspective.

Recent market trends have allowed for a considerable shift in decision-making power away from the physician. One structural change is the exponential growth in the availability of information at lower cost regarding health care quality and treatment options. Another important change is in the health care delivery payment system itself with the movement toward managed care. How these structural changes impact patient behavior has not been established to our knowledge. The purpose of this paper is to evaluate the impact of this influx of health care information on demand for health care services, and how that impact may vary by health care delivery systems.