The Effect of Managerial Factors on the Incidence of Medical Operations: The Case of Cesarean Sections

High cesarean section rates in Taiwan are usually explained by medical, socio-economic, and religious reasons. This paper analyzes managerial factors determining cesarean section rates from both demand and supply sides. Taiwan's official data on cesarean section during 1992-2001 are collected. Our major empirical findings are as follows: (1) Cesarean section rates in public hospitals are significantly higher than those in private hospital. (2) Different geographic areas in Taiwan also have significantly different cesarean section rates. (3) An increase in Christian and Catholic population ratio significantly reduces its cesarean section rate, while an area increase per capita income raises an area's cesarean section rates. (4) Medical centers have the highest, regional hospitals have the medium, and district hospitals have the lowest cesarean section rates. Introduction Most existing literature explains the high cesarean section (CS) rates from the viewpoint of medical need (Taffel et al., 1987), socio-economic factors (Stafford, 1991), and religion (Lo, 2003). Managerial aspects (such as the reward system and agency problem) are often neglected. Due to the reward system for doctors, many CS operations are in fact induced demand by the doctors' incentive to increase their own income. Especially in public hospitals where the fixed wage payment is lower, a doctor may have an incentive to earn an extra pay-by-case income by operating CS. Moreover, there is an asymmetric information problem in the medical market such that it is a patient's best response to follow the doctor's advice to have a CS operation. A doctor is an agent for a patient (the principal) to take care of the latter's health. Usually a doctor has an advantage of medical knowledge over a patient. A doctor can easily take his advantage of medical knowledge to persuade a patient to have an extra medical treatment that may not be necessary but indeed will increase the doctor's income. Increasing cesarean section rates are a pandemic trend all over the world, where even according to Taiwan's official statistics, cesarean section (CS) rates on the island have remained high during the past decade (Taiwan Department of Health, 2001). For example, Taiwan's CS rate was 34.5% in 2000, which is a little bit lower than Brazil's 36.0% in 1996 (Hopkins, 2000) but is much higher than other countries' average and optimal rates (6%?16.5%). Although there are mothers-to-be who indeed need CS for medical treatment and CS does save many lives of mothers and infants, CS still presents potential hazards to mothers and infants. For example, an increase in the CS rate may not only enhance the maternal morbidity risk (Rogers, 1988), but also increase respiratory distress syndromes of newborns (De Muylder, 1993). At the same time, an increase in the CS rate also increases medical costs (Shearer, 1993). Consequently, increasing CS rates have become a global issue. Many developed countries, such as the U.S. and Canada, have engaged themselves in solving this problem. Most of the above literature on the CS decision uses questionnaire data or hospital data in a single area. The existing papers on Taiwan's CS rates not only use a questionnaire, but also study only a single hospital (Huang et al., 1997). To our knowledge, this paper is the first effort to use official and national data to study CS rates of all hospitals in Taiwan during the past decade. Both supply and demand sides make the CS decision. In following sections, we will explore the factors causing the high CS rates in Taiwan, both from the supply and demand sides. For the supply-side analysis, the associated factors taken into account in the papers are the doctor's wage system, hospital ownership, etc. For demand-side analysis, the associated factors are religion, regional per capita income, and the national heath insurance program's payment. Method Sub-grouping hospitals by characteristics There are twenty-three municipalities and counties covering the island of the Taiwan. …

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