Do Nurse Practitioners and Physician Assistants Create Competition for Physicians?

Gottlieb and Nicholson (2026) asked how barriers to physician entry and competition from substitute health care providers shape physician markets. They reviewed evidence from medical school and residency data, physician workforce statistics, licensing regulations, insurance claims, earnings data, and prior economic research. They found that strict limits on medical school and residency positions continue to restrict physician supply, while nurse practitioners, physician assistants, certified registered nurse anesthetists, telemedicine, and artificial intelligence are expanding competition. Since 2000, nurse practitioner graduates increased nearly sevenfold, while medical doctor graduates rose only about 30 percent, helping offset physician shortages and expand access to care.

Why This Article Was Selected for The Policy Scientist

The organization of physician labor markets has become a central policy issue as population aging, workforce shortages, and rising demand for medical services place increasing pressure on health systems. Understanding the extent to which nurse practitioners, physician assistants, and other substitute providers can expand health care capacity is therefore timely and relevant well beyond the United States. Gottlieb and Nicholson have made substantial contributions to this literature, and this article in the Journal of Economic Perspectives, one of economics’ most influential journals, provides a valuable synthesis that builds modestly on the classic literature concerning professional regulation and entry barriers. The authors draw on extensive national datasets and a broad body of empirical evidence, producing conclusions that are likely applicable to many developed health systems. As a synthesis rather than an original causal study, the article would be strengthened by future research employing causal inference designs to better identify the effects of expanding substitute providers on access, costs, and quality.

Full Citation and Link to Article

Gottlieb, J. D., & Nicholson, S. (2026). Physician competition: Entry and substitution. Journal of Economic Perspectives, 40(2), 117–142. https://doi.org/10.1257/jep.20251473

Central Research Question

This article examines how competition in physician labor markets is shaped by two complementary forces: restrictions on entry into the physician profession and increasing competition from substitute health care providers. The authors argue that traditional analyses of physician competition have focused too narrowly on market concentration among physician practices while overlooking the institutions that regulate physician supply and the expanding role of alternative providers. They ask how medical school admissions, residency training, specialty selection, occupational licensing, and scope-of-practice regulations influence competition within physician markets. They also examine how nurse practitioners, physician assistants, certified registered nurse anesthetists, foreign-trained physicians, telemedicine, and emerging artificial intelligence technologies are changing the competitive landscape by providing services that were previously performed almost exclusively by physicians. Rather than viewing physician shortages simply as a problem of insufficient physician training, the article investigates how substitution by other providers alters the effective supply of medical care.

Previous Literature

The article builds upon several decades of research examining professional licensing, occupational regulation, physician labor markets, and health care competition. Earlier work emphasized how licensing requirements and educational restrictions create barriers to entry that raise physician earnings and limit competition. Classic economic theories of regulation argued that occupations possessing strong professional organizations could successfully influence licensing institutions to restrict supply and preserve market power. Subsequent research documented persistent differences in physician earnings across specialties, demonstrating that high-income specialties consistently attract more applicants than available residency positions.

More recent scholarship has expanded the discussion beyond physician supply to include the growing role of substitute providers. Nurse practitioners, physician assistants, certified registered nurse anesthetists, and other advanced practice clinicians have become increasingly important contributors to health care delivery. Previous studies have shown that expanding scope-of-practice laws allows these professionals to provide a broader range of services while improving access to care in underserved areas. Other research has documented the effects of telemedicine, changing insurance markets, physician consolidation, and technological innovation on competition.

The article integrates these previously separate research streams into a unified framework. Rather than treating physician entry restrictions and substitute providers as independent issues, the authors argue that they jointly determine competition within physician labor markets. Their synthesis also incorporates recent work examining physician specialty choice, residency matching, labor market incentives, and changing patterns of physician employment.

Data

The article synthesizes evidence from numerous national datasets and previously published empirical studies rather than introducing a single original dataset. The discussion incorporates information from medical school admissions, residency match programs, physician workforce statistics, physician earnings surveys, Medicare administrative data, private insurance claims, educational statistics, licensing information, labor market surveys, and international comparisons.

Medical education data document long-term trends in medical school enrollment, residency positions, residency match outcomes, specialty selection, examination scores, and applicant characteristics. Workforce data describe physician supply, employment patterns, specialty distribution, and international physician migration. Earnings data compare compensation across physician specialties and competing health professions. Administrative claims data measure the growing share of medical services provided by nurse practitioners and other substitute providers.

The article also draws upon longitudinal evidence documenting changes in physician practice ownership, physician concentration, medical school expansion, residency funding, and occupational licensing reforms. International comparisons provide context for physician supply relative to other developed countries. Collectively, these data sources offer broad coverage of physician labor markets over several decades while allowing comparisons across occupations, specialties, and jurisdictions.

Methods

This article is primarily a research synthesis rather than an original empirical analysis. The authors review existing theoretical models, summarize descriptive evidence, and integrate findings from numerous published studies into a coherent conceptual framework. They combine descriptive statistics, economic theory, institutional analysis, and evidence from previous empirical research to explain how physician competition operates.

A central contribution is the development of a conceptual model linking physician ability, specialty choice, training constraints, earnings, and regulatory barriers. The framework explains how fixed residency positions interact with physician preferences and financial incentives to determine specialty allocation. Rather than allowing unrestricted labor market adjustment, residency caps create persistent shortages in desirable specialties while directing highly qualified physicians toward the most financially rewarding fields.

The article also applies labor economics concepts to explain substitution between physicians and alternative providers. Changes in scope-of-practice regulations, reimbursement policies, technological innovation, and workforce composition are interpreted as factors that influence the degree of substitution between physicians and other clinicians.

Although the article summarizes evidence from numerous empirical studies, it does not itself employ causal inference methods or randomized controlled trials. Instead, it relies primarily on descriptive evidence and previously published observational research. The conceptual framework provides a useful interpretation of these findings, but future research using quasi-experimental designs, natural experiments, or randomized evaluations where feasible would strengthen causal conclusions regarding the effects of expanding substitute providers, modifying scope-of-practice laws, or increasing physician training capacity.

Findings/Size Effects

The article identifies substantial evidence that physician entry remains tightly regulated despite growing demand for medical services. Between 1980 and 2025, the U.S. population increased by approximately 50 percent, while the population over age 64 increased by roughly 140 percent. During the same period, first-year positions in U.S. medical schools expanded by only about 34 percent, contributing to continued constraints on physician supply.

The United States currently has approximately 2.7 practicing physicians per 1,000 population compared with an OECD average of approximately 3.8 physicians per 1,000 population. Growth in physicians per capita since 2000 has been roughly one-half the average growth observed across OECD countries.

The authors demonstrate that physician specialty markets remain highly competitive because residency positions are limited. High-income specialties consistently receive substantially more qualified applicants than available training positions, allowing these specialties to maintain high selectivity and elevated physician earnings. Physicians entering lucrative specialties generally possess stronger academic credentials, higher examination scores, and more extensive research accomplishments than those entering primary care.

The article also documents dramatic growth among substitute providers. Since 2000, nurse practitioner graduates have increased several-fold, substantially outpacing growth among physicians. Private insurance claims indicate that nurse practitioners now provide an increasing share of primary care visits, while certified registered nurse anesthetists perform a growing proportion of anesthesia services. Employment growth among mid-level providers substantially exceeds physician employment growth.

Compensation differences further illustrate these labor market dynamics. Primary care physicians generally earn between approximately $265,000 and $326,000 annually, while many specialty physicians earn well over $500,000. Nurse practitioners and physician assistants earn approximately one-half as much as primary care physicians, creating financial incentives for health systems to substitute lower-cost providers for selected services whenever regulations permit.

The article also highlights substantial changes in physician employment. Solo practice has declined dramatically over recent decades, while employment within large health systems has become the dominant organizational model. At the same time, telemedicine and artificial intelligence are beginning to reduce geographic barriers to physician competition and may further expand opportunities for substitution in selected clinical activities.

Rather than concluding that physician shortages necessarily require dramatically expanding physician training, the authors argue that substitute providers have already increased the effective supply of medical services. Changes in occupational regulation, reimbursement policies, and technological capabilities therefore influence health care capacity alongside physician education itself.

Conclusion

The article argues that physician competition should be understood as the combined result of regulated physician entry and expanding substitution by other health care providers. Traditional measures of market concentration alone cannot adequately explain competition because they overlook the institutional mechanisms that determine physician supply and the growing ability of alternative providers to perform many clinical services. By integrating research on physician education, specialty choice, labor markets, occupational licensing, and substitute providers, the authors present a broader framework for understanding health care workforce dynamics. Their synthesis demonstrates that physician markets are evolving through both persistent regulatory constraints and increasing competition from nurse practitioners, physician assistants, certified registered nurse anesthetists, telemedicine, foreign-trained physicians, and emerging technologies. The article provides a comprehensive foundation for future empirical research examining how these forces influence health care access, costs, quality, and workforce capacity.