Abstract
Solving the health care consumers' (producers') utility maximization (cost minimization) problem could entail the substitution of alternative care providers (factor inputs) when the relative out-of-pocket costs (factor prices) change, ceteris paribus. The conceptual advancement in this contribution is illustrated with an earlier paper (P. Deb and A. Holmes, Health Economics 7(4):347-362, 1998) on the economic relationship of physicians (M.D.s) and 'other providers' (Ph.D.s, other) in the US outpatient demand for mental health care services. Many aspects of our conceptual progress are insightful. Foremost, our conclusion on whether M.D. and non-M.D. providers of outpatient mental health care are economic complements or substitutes depends on the alternative measure of the substitution elasticity used. Second, when correctly measured the expenditure-minimizing substitutions among mental health providers can be useful policy decision guides for consumers covered under traditional indemnity insurance with deductibles or managed care plans with user co-payments. Finally, our conceptual clarification should motivate future investigators of health services demand (or use) and cost models to consider a wider conceptual foundation for assessing the structure and implications of provider relationships.