That is the title of a Journal of Economic Literature article by Gottlieb and Nicholson (2026). Here is a Q&A summary of their article.
What are the defining features of physician competition?
The authors argue that competition in the physician market is a two-stage process:
“First, potential physicians compete to enter medical school and then many of them compete to enterhigher-paid specialties. Within the market for physicians, tight regulatory caps on medical-school seats and residency slots—especially for high-paying specialties…
Second, fully trained physicians compete with each other and—as we willemphasize—with other health care occupations in the market for patients…substitutes—such as nurse practitioners (NPs), physician assistants, certifiedregistered nurse anesthetists, doctors of osteopathic medicine, foreign-trained physicians, telemedicine, and even emerging artificial intelligence tools—can expand capacity and mitigate the oft-predicted physician shortage.”
Do hospitals like training doctors?
Yes! The authors argue that medical residents are highly profitable to hospitals. The reason is that they collect revenue from insurers for the services the residents provide. Additionally, the cost of training the residents is largely offset by government subsidies. Medicare provides “direct graduate medical education” and “indirect medical education” subsidies worth $51,000 and $119,000 respectively per hospital. The former is supposed to pay for direct cost of training and the latter for the fact that residents are less productive than full-time doctors.
How have physicians limited competition to date?
The authors argue that specialization that is common in other industries is often limited in medicine:
“But potential substitutes for some of the care provided by physicians—nurse practitioners, physician assistants, certified registered nurse anesthetists, and certified nurse midwives—are also regulated. Indeed, Starr (1982) argued that physicians have traditionally controlled not just the institutions for training doctors, but also the professions that are potential (partial) substitutes for doctors: ‘In industry, despite the resistance of artisans, the dictates of the market broke up the work of skilled craftsmen into low-skill—and consequently cheaper—labor. In medicine, physicians maintained the integrity of their craft and control of the division of labor. While medicine itself became highly specialized, the division of labor among physicians was negotiated by doctors themselves instead of being hierarchically imposed upon them by owners, managers, or engineers.’”
Do we see more entry of non-physician clinicians in recent years?
Yes! We do see that non-US MDs are taking an increasing share of residency positions. These include doctors of osteopathy (DO), and US and non-US citizens getting medical degrees from foreign (i.e., non-US) medical schools. Graduates from international medical schools are generally required to complete a US-based residency in order to practice in the US–even if they have completed a residency program or have practiced abroad.
Additionally, “…since 1984, 27 states have passed liberal NP “scope of practice” laws, which allow NPs to diagnose and treat patients independently, including ordering and interpreting tests and writing prescriptions.” Unsurprisingly, the share of care provided by these non-MD is growing, in large part because their salary is much lower and the supply of physicians is limited.
Besides non-physician clinicians how else is the physician market changing?
Physician market power seems to have declined. Rather than negotiating prices with individual consumers, physicians now negotiate prices with large health insurers. The article states that the 3 largest private health insurers in the US now cover 122 million people.
Do the authors have any policy recommendations?
Because of this duality, the authors argue for the need to consider both gatekeeping and competition:
“In effective pro-competition policy in the physician market would have two prongs. It would encompass, first, the upstream gatekeeping institutions (accreditation bodies, residency review committees, and state licensure boards) that ration physician entry and, second, the downstream scope-of-practice and technology rules that determine how easily other professionals can substitute for (or complement) physicians in treating patients.”
You can read the full article here.
