Uncertainty, Tacit Knowledge, and Practice Variation: Evidence from Physicians in Training

Studying physicians in training, I investigate how uncertainty and tacit knowledge may give rise to significant practice variation. Consistent with tacit knowledge accruing only with experience, and empirically exploiting a discontinuity in the formation of teams, experience relative to a peer substantially increases the size of variation attributable to the physician trainees. Among the same physician trainees, convergence occurs for patients on services driven by specialists, where there is arguably more explicit knowledge, but not on the general medicine service. This difference is unexplained by formally coded patient information. In contrast, rich physician characteristics correlated with preferences and ability, and quasirandom assignments to highor low-spending supervising physicians explain little if any variation. ∗I am grateful to David Cutler, Joe Doyle, Bob Gibbons, and Jonathan Gruber for their guidance on this project from an early stage. I also thank Achyuta Adhvaryu, Daron Acemoglu, Leila Agha, David Autor, Daniel Barron, David Bates, Amitabh Chandra, Michael Dickstein, Amy Finkelstein, Emir Kamenica, Jonathan Kolstad, Eddie Lazear, Frank Levy, Grant Miller, David Molitor, Chiara Sabatti, Jonathan Skinner, Doug Staiger, and Chris Walters for helpful comments. Joel Katz and Amy Miller provided invaluable context to the data. I acknowledge support from the NBER Health and Aging Fellowship, under the National Institute of Aging Grant Number T32-AG000186; the Charles A. King Trust Postdoctoral Fellowship, the Medical Foundation; and the Agency for Healthcare Research and Quality Ruth L. Kirschstein Individual Postdoctoral Fellowship 1-F32-HS021044-01.