The Substitution Between Primary and Emergency Care in Individuals with Chronic Conditions: Evidence from a Structural Model

We examine the substitution between primary and emergency secondary care in patients with chronic conditions by using a dynamic structural model for longitudinal count data. The hidden Markov bivariate Poisson model allows for disentangling unobservable time-varying heterogeneity from the dynamic effect of utilization of primary and secondary care. Also, unobserved heterogeneity can be modeled as a function of observable individual characteristics, including age, income, and education. We find that an additional standard visit in primary care reduces utilization of emergency care by 9%, while the substitution effect of preventive assessment visits is two times larger. The substitution effect is larger in individuals with a high utilization profile, it decreases with individual age, while it shows little difference by socioeconomic status. Finally, the probability of switching utilization profile decreases with age. Our analysis contributes to the existing evidence on the substitution effect from policy evaluation studies.