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Jonathan Sunshine, PhD and Cristian Meghea, PhD. Research, American College of Radiology, 1891 Preston White Drive, Reston, VA 20191, 703-648-4923, cmeghea@acr.org

Rationale: There is only a small literature on the production function of physicians. We add to this literature, making a number of new contributions, methodological and substantive. Curtailing health expenses is a recurrent concern in almost all developed nations, and identifying methods to improve productivity may help ease the problem. Also, with a shortage of specialist physicians believed to be impending, finding means to enhance productivity is critical to good patient care.

Objective: To empirically investigate the determinants of productivity of radiology practices, exploring the effect of physician labor input, physician characteristics, purportedly productivity-enhancing technologies and techniques, and other practice characteristics.

Data and Methods: Data are from the American College of Radiology's (ACR's) 2003 Survey of Radiologists, a nationally representative sample survey of radiologists in the United States containing information on both the respondents and the practice in which they work. We estimate the production function via OLS, the outcome being the logarithm of practice's procedures per year. For flexibility, the physician labor inputs -- full-time equivalent (FTE) radiologists, weekly hours, weeks worked annually -- enter in both linear and logarithmic forms allowing for the possibility of non-constant input elasticities. To address the downward bias introduced by measurement error in labor inputs, we made various estimates of the error size and then used Monte Carlo methods to find what true elasticity combined with each plausible estimate of measurement error yields the elasticity observed in the regression.

Results: The FTE-radiologists elasticity of output is 0.8 directly measured (true elasticity between 0.85-0.90 if accounting for bias), the weekly hours elasticity is 0.4 (0.5-0.7, bias accounted) and the annual weeks elasticity is 0.4 (0.5-0.7, bias accounted). Only three of eight techniques used in radiology practices have a positive independent impact on productivity. Surprisingly, practices where individual radiologists work in more locations have higher productivity. Government owned practices are 18 percent less productive than practices owned solely by members. Practices in the Northeast and West census regions are more productive than practices in the South.

Conclusions: Due to unaccounted measurement error, previous studies probably underestimated the input elasticities in the production function of medical services. To increase output it is more efficient to add radiologists to the practice than to increase the hours or weeks worked. Some techniques used to improve radiologist productivity have less than the generally believed effect.

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