Diagnosis and Unnecessary Procedure Use: Evidence from C-sections∗

This paper provides a model of in which doctors have two dimensions of skill: diagnostic skill and skill in performing procedures. Unlike higher procedural skill, which leads to higher use of surgical procedures across the board, better diagnostic skill results in fewer procedures for the low risk, but more procedures for the high risk. That is, better diagnostic skill improves the matching between patients and procedures leading to better health outcomes. Using data on a million births we derive empirical analogues to our theoretical measures of doctor skill, and use these measures to show that improving diagnostic skills from the 25th to the 75th percentile of the observed distribution would reduce C-section rates by 15.8% among the lowest risk, and increase them by 4.7% among the high risk. Since there are many more low risk than high risk women, improving diagnosis would reduce overall C-section rates while improving health outcomes for both high risk and low risk women. We conclude that distinguishing between at least two dimensions of doctor skill is feasible and might help to improve the quality of medical care. ∗We thank Samantha Heep and Dawn Koffman for excellent research assistance, and Amitabh Chandra, Jonathan Gruber, Amy Finkelstein, Kate Ho, Jonathan Skinner and seminar participants at Princeton, Kyoto University, the National Institute of Population and Social Security Research, Warwick Univeresity, University College London, the London School of Economics, the Paris School of Economics, the NBER Summer Institute, and the University of Michigan for helpful comments. This research was supported by a grant from the Program on U.S. Health Policy of the Center for Health and Wellbeing.