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The effects of centralization and board membership reform on health occupational licensing policies
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Content
THE EFFECTS OF CENTRALIZATION AND BOARD MEMBERSHIP REFORM
ON HEALTH OCCUPATIONAL LICENSING POLICIES
by
Michael Bruce Nlchol
A Dissertation Presented to the
FACULTY OF THE GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(Public Administration)
December 1987
UMI Number: DP31191
All rights reserved
INFORMATION TO ALL USERS
The quality of this reproduction is dependent upon the quality of the copy submitted.
In the unlikely event that the author did not send a complete manuscript
and there are missing pages, these will be noted. Also, if material had to be removed,
a note will indicate the deletion.
D iaseftalion R s b lis te g
UMI DP31191
Published by ProQuest LLC (2014). Copyright in the Dissertation held by the Author.
Microform Edition © ProQuest LLC.
All rights reserved. This work is protected against
unauthorized copying under Title 17, United States Code
ProQuest LLC.
789 East Eisenhower Parkway
P.O. Box 1346
Ann Arbor, Ml 48106 - 1346
UNIVERSITY OF SOUTHERN CAUFORNIA
THE GRADUATE SCHOOL
UNIVERSITY PARK
LOS ANGELES, CAUFORNIA 90089
Ph.D.
Pu
This dissertation, written by
Michael Bruce Nichol
under the direction of h .l^ Dissertation
Committee, and approved by all its members,
has been presented to and accepted by The
Graduate School, in partial fulfillm ent of re
quirements for the degree of
D O C T O R O F P H ILO S O P H Y
Dean of Graduate Studies
Date
DISSERTATION COMMITTEE
Chairperson
Acknowled&ements
Dissertations require solitary effort, but this study
could not have been completed without considerable
assistance. While my debts to these people and
organizations are substantial, it is hoped that this
acknowledgement will provide some small measure of my
appreciation.
First, thanks are due the University of Southern
California and the School of Public Administration for the
research support provided during all facets of this
research. Through their funding, research assistance was
provided by Allison Koehler, who entered most of the data
for the study. In addition, I would like to thank Scapa
Praetors, the support group for the School, for funding
fellowship grants throughout my USC education which allowed
me to concentrate my efforts on scholarship.
Second, I would like to thank all the occupational
licensing agency personnel and researchers who provided
assistance. In spite of the time-consuming
responsibilities of state licensing agencies, many
responded to the extensive questionnaire with comprehensive
data. I would also like to thank Ellen Hume from the
Clearinghouse on Licensure, Enforcement, and Regulation,
for her consistent helpfulness.
ii
Third, a number of people provided general
encouragement. Professor Gary Reid endured my errors of
omission, commission, and enthusiasm in learning SAS with
humor and patience. Professor Joan Krueger provided
assistance in attempting to run some of the SAS time series
estimation models. Professors Howard Greenwald and Robert
Myrtle commented on early drafts of the proposal. Cindy
Jones reviewed the study in its early stages and enlivened
the commute with discussions of various public policy
issues and methods. Connie Atkins and Marie Smith put up
with my frequent requests with their customary indulgence
and high spirits.
My parents, Patt Gocke Nichol and Monte Nichol and
Shirley and Edward Spacapan, provided continual
encouragement, even while they wondered when this project
would reach completion. Their support after I made the
decision to begin working on the doctorate was invaluable.
My dissertation committee stimulated new approaches to
the problems presented in the research and persuaded me to
consider alternative hypotheses in future projects on the
topic. Professor William hammers prompted me to
contemplate the political side of the issue with some care
and was very open to meeting to discuss interesting
results. Professor Donald Winkler pointed out several
important shortcomings in the final product that begged for
correction.
iii
My committee chair. Professor Elizabeth Graddy, has
provided guidance and support throughout my academic career
at USC. Without her help, I sincerely doubt that I would
have been motivated to complete the degree. 1 tested her
patience numerous times during this research and I never
found it wanting. I am indebted to her in ways that can
never be adequately repaid, and for her help I am truly
grateful.
My greatest gratitude is to my wife. Professor
Shirlynn Spacapan. I definitely could not have embarked on
this effort without strong financial assistance from the
"Spacapan Scholarship Fund." But most important of all,
she has served as my role model, since I was fortunate to
be able to follow her through the dissertation process.
Whenever I stumbled on the path, she was there to pick me
up and point the way. Even though she was incredibly busy,
she always had time to discuss my progress and gently
motivate me to "get it done." All I can offer in return is
my eternal love.
IV
Table of Contents
Page
Acknowledgements ii
List of Tables and Maps vii
Chapter One--Introduction...................................1
History of Licensing
Significance of this Study
Organization of the Dissertation
Chapter Two--Literature Review.............................. 12
Theories of Regulation and Implications for Licensure
The Process of Regulation
Criticisms of Occupational Licensing
Conclusion
Chapter Three--Occupational Licensing Reform Theory...... 57
Competing Theories of Regulation
The New Balance
Legislative Versus Board Activity
Conclusion
Chapter Four--Empirical Specification...................... 80
Testing the Effects of Reforms on Health Occupations
Tests of Legislative Reform Theories
Licensing Board Effects
Conclusion
Table of Contents (continued)
Chapter Five--Results....................................... 112
Equation One: Entry Restrictions
Equation Two: Mandatory Continuing Education
Equation Three: Consumer Information
Equation Four: Discipline
Chapter Six--Conclusions....................................160
Contributions to the Licensing Research
Implications for Public Policy
Areas for Future Investigation
Selected Bibliography....................................... 169
Appendix.......................................................1 84
VI
List of Tables and Maps
Page
1. Table 1.1: Dates of Licensing Statutes for
Selected Health Occupations
10
2. Table 4.1 : Variables for Tests of Legislative
Equations
89
3. Table 4.2: Variables for Tests of Licensing
Board Equations
101
4. Table 4.3: Variable Specification and Sources 109
5. Table 5.1 : Descriptive Statistics--Selected
Variables, 1987 Survey: M.D.
115
6. Table 5.2: Descriptive Statistics--Selected
Variables, 1987 Survey: D.O.
117
7. Table 5.3: Descriptive Statistics--Selected
Variables, 1987 Survey: D.C.
119
8. Table 5.4: Descriptive Statistics--Selected
Variables, 1987 Survey: R.N.
121
9. Table 5.5: Means and Standard Deviations--
Selected Variables, 1984
123
10. Table 5.6: Equation 1--Chiropractors, 1984 125
1 1 . Table 5.7: Equation 1--A11 Occupations Pooled 128
12. Table 5.8: Equation 2--A11 Occupations Pooled 133
13. Table 5.9: Equation 2 (Abbreviated)--
Pooled Analysis
137
14. Table 5.10 : Equation 3--Physicians (M.D.), 1984 140
15. Table 5.11 : Equation 3--Pooled Analysis 141
16. Map 5.1 : Combined Responses for All
Occupations Pooled
151
17. Map 5.2: M.D. Responses for All
Occupations Pooled
152
vii
List of Tables and Maps (continued)
18. Map 5.3: D.C. Responses for All 153
Occupations Pooled
19. Map 5.4: D.O. Responses for All 154
Occupations Pooled
20. Map 5.5: R.N. Responses for All 155
Occupations Pooled
21. Map 5.6: M.D. Responses for Second Equation, 156
Pooled Analysis
22. Map 5.7: M.D. Responses for Third Equation, 157
Pooled Analysis
23. Map 5.8: R.N. Responses for Second Equation, 158
Pooled Analysis
24. Map 5.9: R.N. Responses for Third Equation, 159
Pooled Analysis
VlLl
Introduction
The focus of this dissertation is to determine the
effect of structural reforms on legislative and licensing
board policies. Two structural reforms are analyzed: the
addition of public members on licensing boards and the
centralization of the licensing function. Tests of
theories related to performance under these reforms are
applied to several health care occupations, including
medical doctors (M.D.s), osteopaths (D.O.s), chiropractors
(D.C.s), and registered nurses (R.N.s).
This study is based on the proposition that some
regulation of physicians and nurses is necessary because of
information restrictions and externalities present in the
provider-consumer relationship. First, consumers generally
do not have access to information that can be used to
improve their purchasing decisions. When they do have such
information, the health care financing system provides few
incentives for them to use it. Second, externalities can
have significant impacts on society. Health care
professionals can potentially create major problems due to
errors of commission or omission. For example, an improper
diagnosis can result in an epidemic that could threaten
large population groups.
However, while occupational regulation is necessary,
it should be conducted as efficiently as possible.
Consumers (and society) should be protected from life-
threatening mistakes to the extent practical, but should
otherwise be able to choose among the different options
which may satisfy individual preferences. The purpose of
this study is to determine whether several licensing
reforms facilitate the accomplishment of these objectives.
The rest of this chapter introduces a brief history of
licensing to provide some perspective on the origins of the
problem. The significance of this study and how it relates
to other studies in the field is also discussed. Finally,
the organization of the dissertation is detailed.
History of Licensing
The development of licensing as a quality assurance
method is an outgrowth of the organization of craftspeople
into guilds (Benham, 1978). Guilds were developed to
increase the quality of the product provided by
craftspeople and, not coincidentally, to protect their
members from competition. Quality gains accrued through
communication between members of the guilds. As networks
of craftspeople formed, members shared work techniques and
tools, embracing improvements and discarding obsolete
procedures.
Craftspeople were protected from competition because
the guild would pressure non-members to refrain from
practicing the craft. In some localities, craftspeople
were heavily taxed if they were not members of the guild.
Eventually local jurisdictions passed ordinances
prohibiting non-guild members from practicing their craft.
Although many may not consider health care a craft,
physicians and nurses were among the first professions in
the U.S. to organize as guilds. As a natural progression,
these professions were among the first licensed (Council of
State Governments, 1952). As noted in Table 1.1, nearly
80% of the states required licensure of physicians by 1900.
By 1915, virtually all states required licensure for
physicians (M.D.s). By 1909, 46% of all states required
licensure of nurses and, by 1933, all states required
licensure for registered nurses.
It is generally agreed that the watershed event for
controlling the practices of physicians, nurses, and other
health care practitioners was the publication of the
Flexner Report in 1910 (Freeh, 1974; Benham, 1978; Starr,
1982). In this report Abraham Flexner excoriated most
medical training in the U.S., and called for the
standardization of training and the raising of practice
qualifications.
The adoption of this approach had several important
ramifications. First, the number of medical schools
3_
declined because many schools could not meet the new
standards (Benham, 1978). As a result, fewer medical
students were educated. Second, the Flexner Report reduced
incentives for schools to innovate (Benham, 1978). The use
of a standardized approach to medical education penalized
innovators since innovative schools could be decertified
for their failure to follow established standards and their
students could fail licensing exams which reflected the
standard curriculum.
The limitation on innovation and focus on
standardization encouraged the delineation of
jurisdictional lines because members of the profession
wanted to assure that all practitioners obtained the same
basic skills. Members of the guild sought further
protection from other professionals that might provide
similar services under different titles. The
responsibilities and authorities of nurses, osteopaths, and
chiropractors (among others) became strictly circumscribed.
Thus, the limitation on physician innovation had profound
effects on other health care professionals.
As these tendencies were institutionalized through the
introduction and implementation of licensing, the medical
profession reflected two common characteristics of guilds.
First, the profession asserted that uniform quality was
provided by their members. Second, because quality was
uniform, the profession alleged that there was no need for
4
consumers of their services to compare the performance of
members of the profession. The profession thus avoided
competition and institutionalized inefficient behavior.
Significance of This Study
The significance of this research can be expressed in
two major areas. In the broader context, this research may
help determine whether these structural reforms can be used
in the regulation field to ameliorate capture of the
regulatory process by the regulated professionals and to
increase efficiency and encourage innovation. In the
narrower context, this research will address these effects
in the health care field.
Historically, analysts have expressed concern that
professionals capture the mechanisms by which they are
regulated (Friedman and Kuznets, 1945; Bernstein, 1955;
Stigler, 1971). In order to avoid this capture of the
regulatory process, various authors have proposed reforms
of the licensing system (Cohen, 1973; Shimberg, et al.,
1973; Cohen, 1980; Gaumer, 1984; Gross, 1984). Few of
these reforms have been empirically tested (see Chapter 2
for a discussion of these assessments). The onl^^reform
that has been assessed to any degree is sunset review and
that has been limited to case studies (Slaughter, 1986 is
representative) and descriptions of administrative issues.
with little emphasis on policy changes generated by the
innovation (Roederer and Palmer, 1981).
It is argued in Chapter 3 that the inclusion of public
members on occupational licensing boards is intended to
tilt the balance of regulation toward the public interest,
rather than the narrow interests of the regulated
profession. If it can be shown that this structural reform
is reflected in new, consumer-oriented policies, then this
reform may be used in other regulatory situations to assure
protection of the public interest.
The studies of licensing board membership reforms have
been constrained to case studies of individual states
(Schütz, 1983; Michigan Department of Licensing and
Regulation, 1983; Chesney, 1984). Those which have taken
broader perspectives have been primarily descriptive
(Schütz, Musolf, and Shepard, 1980; Council of State
Governments, 1980).
The centralization of licensure administration is
expected to be more efficient than decentralized
approaches. Furthermore, these efficiencies are expected
to allow licensing agencies to focus more aggressively on
some of the agency policies which assist consumers (see
Chapter 3 for a discussion of this point). To date,
licensure centralization studies share many of the
limitations of board composition research, having been
mostly descriptive in content (Roederer and Shimberg,
1980).
In short, there have been a number of studies
demonstrating that various social, political and
institutional factors affect the introduction of
occupational legislation (Stigler, 1971; Pfeffer, 1974;
Smith, 1982) and the restrictiveness of licensing policies
and regulation (Begun, Crowe, and Feldman, 1981; Carroll
and Gaston, 1981a; Schütz, 1983). However, the studies
regarding the effects of board membership and
administrative centralization are limited in number and
scope. This study will alleviate these shortcomings in the
research literature.
This research is particularly timely and relevant for
the health care field. Even though a number of policies
have been enacted by political and organizational entities
at the national, state, and local levels, health care costs
continue to increase at a faster rate than inflation
(Rundle, 1987). Furthermore, while researchers and policy
makers have intensified their interest in quality
assurance, relatively few studies have explored the
policies of the primary quality assurance mechanism in the
field: licensing (Langwell and Moore, 1982).
This research addresses both health care cost and
quality issues. Licensing boards can enact policies which
encourage the proliferation of professionals (including
7
physicians, nurses, and their substitutes and complements)
which should increase competitive forces, and drive prices
down. Licensing boards can also enact policies which
expand or refine their quality monitoring responsibilities,
thus enhancing consumer protection.
Organization of the Dissertation
This study is organized into six chapters. The next
chapter reviews the literature on occupational licensing
theories and empirical support for those theories.
Considerable attention is paid to an examination of
licensing reform approaches and the limited evidence
available regarding their effectiveness.
Chapter 3 details the theories supporting this study.
The primary theory upon which this study is based expects
structural reforms to result in both greater protection for
consumers and reduced restrictions on professionals.
Secondary theories apply this basic orientation to
legislative and licensing board policies.
The fourth chapter identifies the independent and
dependent variables used to test the theories of
legislative and licensing board behavior. This chapter
also includes a discussion of implications of utilizing
these variables and their data sources.
Chapter 5 details the analysis of the statistical
tests and provides possible explanations for the outcomes.
8
Chapter 6 concludes with a discussion of the implications
of these findings and a delineation of future research
related to this topic.
Table 1.1
Dates of Licensing
for Selected Health
Statutes
Occupations
State M.D. D.O. D.C. R.N.
Alabama 191 1 191 1 191 1 1915
Arizona 1901 1941 1921 1921
Arkansas 1903 1903 1915 1913
California 1876 1901 1922 1 905
Colorado 1881 1881 1933 1905
Connecticut 1893 1900 1917 1905
Delaware 1895 1895 1937 1909
Florida 1889 1927 1919 1913
Georgia 1894 1909 1921 1907
Idaho 1899 1907 1919 191 1
Illinois 1877 1899 1899 1907
Indiana 1897 1905 1927 1905
Iowa 1883 1898 1921 1907
Kansas 1901 1913 1913 1913
Kentucky 1893 1893 1928 1914
Louisiana 1894 1908
— — S B M B
1912
Maine 1895 1919 1923 1915
Maryland 1892 1914 1920 1904
Massachusetts 1894
*
— — — —
1904
Michigan
* *
1933 1909
Minnesota 1883 1903 1919 1907
Mississippi 1882 1896
— — — —
1914
Missouri 1901 1903 1927 1921
Montana 1889 1901 1917 1913
Nebraska
*
1919 1915 1909
Nevada 1899 1925 1923 1933
New Hampshire 1915
•k
1921 1907
New Jersey 1890 1913 1923 1912
New Mexico 1889
■k
1921 1923
New York 1879 1907
----
1903
North Carolina
*
1907 1917 1917
North Dakota 1890 1909 1915 1915
Ohio 1896 1902 1916 1915
Oklahoma 1908 1903 1921 1909
Oregon 1895 1907 1915 1911
10
State M.D. D.O. D.C. R.N.
Pennsylvania 1877 1909 1913 1909
Rhode Island 1895 1914 1927 1912
South Carolina
* *
1934 1919
South Dakota 1900 1900 1921 1917
Tennessee 1889 1905 1923 1915
Texas 1873 1873 1949 1909
Utah 1892 1907 1921 1917
Vermont 1904 1904 1919 1910
Virginia 1884 1903 1913 1903
Washington 1909 1919 1919 1909
West Virginia 1882 1907 1925 1907
Wiscons in 1897 1 901 1925 191 1
Wyoming 1899 1899 1929 1909
---- = Occupation not licensed in 1952
Table 1.1 (continued)
* = Indicates that occupation is licensed, but dates
are unknown
Source: Council of State Governments, Occupational
licensing legislation in the States, Table 1, pages 78-80
Chicago: Council of State Governments, 1952.
11
Literature Review
This chapter reviews previous occupational regulation
research. The first section identifies the major
theoretical bases for the introduction of regulation in
general and notes some of the implications of these
theories for occupational licensure. The second section
explains some of the rudimentary elements of the
occupational licensure process in order to provide some
context for the sections that follow.
The third section concentrates on the general
criticisms of occupational licensing as it is practiced in
the United States. Disagreements between researchers and
empirical support for particular positions are highlighted.
The fourth and final section of this chapter analyzes
reforms which have been proposed (and, in some cases,
enacted) to mitigate some of the criticisms noted in the
previous section.
Theories of Regulation and Implications for Licensure
Three basic models can be used to explain the
introduction of regulation: 1) the public interest; 2) the
private interest; or, 3) the political market. The public
interest and private interest models can be placed at
opposite ends of a continuum with the political market
model somewhere between the two.
: 1 . 2 .
The public interest model postulates that regulation
is introduced to obviate information inadequacies and
externalities that may negatively affect free market
operations. In short, without regulation, the public would
not recognize the effects their choices might have on the
individual and on others. This model assumes that some
objective social welfare criterion can be maximized, or at
least improved, through regulatory activities.
The political market model emphasizes the bargaining
that transpires between those who use the regulated
services, those who are regulated, and those who regulate.
Each affected party must determine whether the benefits of
regulation justify the costs of its introduction and how
best to maximize their group’s benefits. Political market
theorists point out that these interest groups experience
substantially different motivations, organizational
capabilities, and interests. For example, it is easier to
motivate a small, easily-identified occupational group
whose members may individually expect large losses (or
gains) as a result of a particular regulation, than other
more amorphous or unwieldy groups like consumers. The
diffused and indirect costs and benefits generated by
regulation have such small individual consequences for
consumers that it is difficult to organize consumer groups
to advocate change (Stigler, 1971; Lowi, 1964; Peltzman,
1976; Hayes, 1978; and. White, 1979).
13
The private interest model expects regulation to be
introduced by those who are to be regulated in order to
protect their income and to enhance their prestige. This
model anticipates that the public gains little or nothing
from regulation because the regulated profession "captures"
the process and manipulates decisions to their advantage.
This model is frequently called the capture model to
reflect this expectation.
Three different versions of the capture model
illustrate the breadth of interests involved in the
introduction and conduct of regulation (White, 1979). The
first, entitled the "rank and file" approach, explains the
introduction of regulation through the interests of those
who are already licensed and who wish to increase training
requirements, while exempting themselves from these
training requirements. Such exemptions are gained
legislatively, in the form of "grandfather" clauses. This
approach benefits existing licensees, especially those who
would not meet the expanded training requirements, at the
expense of those seeking to enter the field and consumers,
whose costs would increase with no commensurate increase in
quality.
The second explanation is termed the "elite" model.
Again, existing members of the occupation seek to require
additional training on the part of new applicants, but for
a different reason. The elites are generally highly
14
trained and oppose the use of grandfather clauses--they are
interested in raising the performance levels of the
occupation by eliminating competition from those not
trained to their standards. Consumers of these services
could conceivably gain from such an approach, if the
service quality increased at a greater rate than the cost
of providing the enhanced services and if the consumer
requires the higher level of service delivery. Existing
licensees would be harmed to the extent that they did not
meet the new standards and were precluded from practicing
the profession. Those existing licensees that met the new
standards would experience income gains as the supply of
licensees declined.
The third explanatory possibility introduces
bureaucratic interests. In this approach, it is
hypothesized that government regulators may be interested
in expanding their spheres of influence (power), status,
and incomes by extending their responsibilities into new
areas. The origins of this model can be traced to
administrative theorists: Weber (1964) argued that
bureaucrats may use their positions to further their own
ends, while Downs (1957) and Tullock (1965) have argued
that bureaucrats may use power to increase incomes and
status. Niskanen (1971) has modeled bureaucratic behavior
by arguing that bureaucrats seek to maximize their budgets
(as a way of increasing individual pay, power, and
15
prestige) and that they thereby consistently over-provide
services. Such an approach would affect both producers and
consumers : producers would be over-regulated and would
likely enjoy enhanced prestige and income, while consumers
might be forced to pay for a higher quality level than they
would like. The role of regulators and the assumptions
regarding this role that are used in this study are
discussed in more detail in Chapter 4.
As more interest groups assert their concerns, there
is increasing recognition that each model may account for
some elements of regulatory activity. As a result of his
research into the licensing of clinical laboratory
personnel. White (1979) suggests that it is necessary to
produce better models of behavior in order to explain the
conduct of interest groups in the regulatory process. In
short, one cannot adopt a simplistic view that agencies are
captured by special interests, or that public interest
theories always prevail, or even that the introduction and
expansion of occupational regulation is solely attributable
to self-interested bureaucrats. In fact, the evidence
indicates that these factors (and others) play important
roles in the enactment of the regulatory environment but no
single factor is likely to account for all such activity
(Moore, 1961). Each of these models may explain part of
the reason for the introduction of occupational licensing.
16
The Process of Occupational Regulation
Once it has been determined that an occupation should
be regulated, there are three options: registration,
certification, and licensing. Registration simply requires
an individual to notify an agency of an intent to practice
the occupation; there thus are no significant barriers to
entry. Certification generally means that the professional
passes an examination or some other credential-verification
process, and is then permitted to represent himself or
herself as "certified." There is no requirement that the
professional must be certified to practice the occupation,
however the professional cannot be portrayed as certified
without verification by the regulating agency (e.g.,
public accountants may practice whether certified or not).
Licensing requires the professional to pass entrance
examinations and other credentialing procedures before
being permitted to practice. While certified individuals
can practice at any time, professions that are regulated
through licensing restrictions disallow practice without a
license (Meier, 1985). Since the primary focus of this
study will be health professionals required to be licensed
for practice, the licensure process is discussed in some
detail in the narrative which follows.
Licensed professions are usually supervised by state
boards composed of members of the profession, public
members, and, occasionally, representatives of the
17
executive branch of state government. These occupational
licensing boards generally have five major duties and
powers (DHEW, 1971):
1. examinâtion--they prepare, conduct, and grade all
examinations of persons who apply for licenses;
2. issuance of licenses--they issue licenses to those
who meet entry standards;
3. suspension and revocation of licenses--they take
disciplinary actions against those found incompetent;
4. enforcement of licensing statutes--they ensure
that practitioners do in fact possess licenses and
renew licenses as necessary; and,
5. approval and supervision of schools--they review
standards used to judge the adequacy of education
provided in professional schools.
An individual who seeks licensure within a regulated
profession must first meet educational standards prescribed
by the relevant board. In addition, some state boards
require the individual to meet age, citizenship, and other
standards. After applying for licensure, the applicant
must pass a written entrance examination. In some
professions, these examinations are administered by
national organizations in an attempt to provide uniform
standards. Once the written examination is passed, some
boards require the applicant to take a practical test that
involves the use of skills deemed important by the board.
18
After the practical test, some boards may require an
individual interview with the applicant to determine the
acceptability of the candidate. Candidates that
successfully complete these steps may be licensed.
The responsibilities of these licensing agencies are
many and varied, as is their accountability. Benjamin
Shimberg notes (1982, p. 20):
As autonomous regulatory agencies have evolved, they
have developed a uniqueness that many ordinary
citizens do not fully understand. While such boards
are not part of the legislative branch, they are
empowered to promulgate rules that have the force of
law. While not formally a part of the executive
branch, they implement laws. While not part of the
judicial branch, they exercise sanctioning power over
individuals similar to those of a court.
Criticisms of Occupational Licensing
Occupational licensing is subject to criticism on four
major dimensions. First, occupational regulation creates
entry barriers which impede movement by professionals into
the occupation and from one state to another. The primary
effect of these barriers is the generation of rents for
producers and increased costs for consumers. Second,
quality of the service may not improve with regulation.
Third, licensing agencies frequently maintain or even
extend information restrictions which inhibit consumers
from being better purchasers of professional services.
Fourth, licensing entails additional costs that are rarely
reflected in discussions regarding establishment or
19
extension of the regulation. Each of these criticisms will
be reviewed.
1. Entry barriers
Licensing generates barriers to entry into the
regulated profession. According to the public interest
theory, those barriers are created to protect naive
consumers from unqualified and potentially dangerous
practitioners. Critics of the licensing process have
argued, however, that such barriers protect the interests
of the regulated, rather than the consumer, since those
already licensed tend to invoke higher standards on
entrants, rather than current practitioners. This has the
effect of lessening competition. In this case, these
barriers simply add to the cost of doing business (Friedman
and Kuznets, 1945; Gellhorn, 1976; Rayack, 1976).
Evidence that licensing increases costs to consumers
is mixed. In areas other than health, some licensed
occupations have generated increased costs (e.g.,
television repair, Phelan, 1974), while other studies have
shown no significant differences (e.g., drycleaning
services, Plott, 1965; plumbers, insurance and real estate
agents, Pfeffer, 1974).
In the health field, it appears that licensing has
generally resulted in increased wages. For example,
Monheit (1975) studied the effects of mandatory licensing
20
on registered nurses and licensed practical nurses and
found that mandatory licensure has had a positive impact on
wages and employment of R.N.s compared to L.P.N.s. White's
1980 study of R.N.s and hospital attendant substitutes
found that there was no effect on wages or employment for
R.N.s in 1960 and 1970, although there was an effect in
1950. White estimated in a 1979 study of clinical
laboratory personnel that states with older, more stringent
licensing laws had wages approximately 16% higher than
states with more recent laws (White, 1979).
Licensing may include several different entry
barriers. Meier (1985) identifies three potential
barriers: nonsense requirements, examinations, and lack of
reciprocity. An additional barrier is experience; many
states require applicants to have completed some sort of
internship or apprenticeship before they may practice
unsupervised. The effects of these barriers, as determined
by the empirical research, are discussed in the sections
which follow.
Nonsense requirements
Nonsense requirements involve a wide variety of
measures unrelated to performance. Some examples are
loyalty oaths, moral character provisions, and citizenship
requirements. Many of the current nonsense requirements
are holdovers from earlier legislation (Shimberg, 1982).
21
Loyalty oaths and character impediments were probably
initially instituted to protect the state from potential
insurgents (although it seems hard to imagine a group of
communist midwives wresting political control of the
state). It appears that most of these requirements are no
longer in force, although some state boards reserve the
right to impose them.
The lack of citizenship can constitute an important
entry barrier, at least within the medical profession. For
example. Butter (1976) shows that there are substantial
differences in the way that foreign medical graduates are
examined for licensure. This study found significant
differences in the pass rates on physician licensing
examinations, and these variations could not be explained
in terms of lesser competence on the part of the foreign
applicants.^
In another example, Freeh (1974) quotes unpublished
work by Stevens and Vermeulen regarding the restrictive
nature of medical specialty boards. Their research,
completed in 1971, showed that some specialty boards
required applicants to be U.S. citizens. Some boards would
1 Subsequent action by the Educational Commission for
Foreign Medical Graduates (ECFMG) and the Liaison Committee
for Medical Education (LCME) has calibrated the foreign
medical graduate test with the test taken by domestic
medical graduates--either the National Boards or the
Federation Licensing Examination (Galusha, 1985).
22
not certify foreign medical graduates within the specialty
unless they were leaving the U.S. Should the certified
specialist return to the U.S., the certification was
required to be surrendered.
Examinations
The impact of examinations used in occupational
regulation can be significant. Because of the importance
of examinations in the licensing process, numerous
researchers have studied the question of examination
validity and reliability. Any number of questionable
examination processes have been exposed in the literature,
with important ramifications for applicants' lives and
ability to practice their chosen profession. For example,
some tests have included sections on applicant personality
(Shimberg, 1973), obsolete techniques (e.g., gold-foil
procedures for dentists, discussed in Freund and Shulman,
1 983), and other areas unrelated to the actual practice of
the profession.
An important element of examination construction is
the extent to which they are valid and reliable. Reliable
tests are consistent over time and yield similar scores
(Gross, 1984). The validity of tests can be measured
several ways; in general, validity refers to the extent
that a particular measuring device (e.g., a test question)
is supported by evidence of its utility ; in this case,
23
utility can be defined as relevance to actual practice.
In addition to a high degree of validity, the ideal
licensing examination would be "criterion-referenced"
(Falk, Weisfeld, and Tochen, 1980). Such tests use
objective standards to judge the performance of examinees ;
the standards should be competency-based to ensure that
examinees will perform capably in practice. However, few
licensing examinations are criterion-referenced, even
though the primary purpose of such entry tests is to
guarantee high practice capabilities. Professional
associations have opposed the use of proficiency testing in
place of experience and educational standards (Waddle,
1979).
The importance of examinations and the ability of
licensing boards to manipulate pass rates has been
described in the research literature. As examples, Hoien
(1965), Pfeffer (1974), Leffler (1978), and Carroll and
Gaston (1979) have established that examination failure
rates are positively related to the profession's per capita
income.
Maurizi (1974) found that licensing boards have used
passing rates as a mechanism to protect members of the
profession from competition, resulting in higher incomes
for the regulated profession. Reviewing 1940 and 1950
data, he found that increases in the number of applicants
resulted in a decline in the passing rate. Further, a 10
24
percent increase in the average income of the regulated
professional generated as much as a 10 percent decline in
the pass rates for the profession. Rayack (1976) studied
data from 12 occupations in three states and found that the
examination barrier helps insulate those already licensed
from competition by new applicants. More recently, Freund
and Shulman (1983) determined that the boards of dental
examiners in some states manipulate the failure rate on
entrance examinations as a direct means to limit the supply
of competitors.
Reciprocity/endorsement
In many professions, states only allow professionals
licensed in another state to practice when a reciprocal
agreement exists between the states. In other words, some
states do not accept the credentials from another state,
unless that state accepts the credentials of their own
licensees. Reciprocal arrangements are generally
considered attempts to protect present licensees from out-
of-state competition. States which endorse licenses from
other states allow practitioners to move across state lines
and continue their profession, regardless of the existence
of reciprocal agreements. These states generally only
require the individual to apply for a license in the new
state and submit proof of licensure in the other state.
Reciprocity can provide a meaningful function when the
25
State is interested in assuring competence in state-
specific skills (such as law), however most occupations do
not require such specialization. Even in the case of law,
it is not clear that reciprocity restrictions meet their
stated function (Pashigian, 1979).
Shepard (1978) has noted that some professions have
opposed the elimination of reciprocity restrictions on the
grounds that standards would decline with increased
mobility. This argument implicitly accepts the notion that
incompetent practitioners "exist in sufficient proportions
nationally as to warrant concern" (p. 190). However, as
Shepard indicates, these inadequacies should generate
interest in training improvements rather than mobility
restrictions which only affect the distribution of the
incompetent practitioners.
The empirical literature has consistently reported
that reciprocity restrictions limit interstate mobility for
professionals (Holen, 1965 [dentists and lawyers];
Pashigian, 1979 [dentists and lawyers]; and Boulier, 1980
[dentists]), although these restrictions may be less
significant than the act of licensing itself (Pashigian,
1979). It may be that such restrictions would generate
additional income for existing licensees, at the expense of
consumers. However, evidence on the income effects of
reciprocity is mixed. Shepard (1978) found that dental
services may be 12 to 15% more expensive in states with
26
geographic restrictions. Boulier (1980), on the other
hand, found a negligible effect on dental service prices
due to reciprocity limitations.
Experience requirements
Some state licensing boards require applicants to
serve an internship or other trial practice period under
supervision of a licensed professional. In theory, this
requirement could have considerable validity in assuring
competent practice. Although some might argue that
reliance on conventional experience credentials may inhibit
adoption of useful and acceptable innovations, relevant
evidence from the field of psychology indicates that work
experience is the best predictor of practice competence
(Gross, 1985) .
While there has not been a great deal of research
regarding the effects of experience requirements on
licensing outcomes, there is some evidence that experience
requirements tend to be generated in an arbitrary and
capricious manner. In order to determine the fairness of
experience guidelines, Cathcart and Graff (1978) reviewed
the requirements of the 58 occupations regulated by the
State of California in 1977. Using a model which included
such variables as subjective ratings of the seriousness of
the impact of the profession on the consumer, the
discretion allowed the practitioner, and the extent to
which the profession's educational programs require
27
practical training, they found that professions with
similar scores on the model index required vastly different
experience standards. They concluded that these
requirements appear to be unrelated to any rational
determination.
Summary
In summary, it appears that empirical studies have
consistently revealed the competitive restrictions
generated by entry barriers in the licensing process.
Nonsense requirements, of which citizenship is a prime
example, have no relation to professional competence and
are clearly intended to restrict the flow of practitioners
into the field. Licensing examinations are sometimes used
to reduce competition from new applicants. These tests
rarely address practice competencies. Instead, many boards
which approve such tests settle for indications of
scholarship and test-taking ability. Requirements for
reciprocal licensing agreements do not appear to contribute
to increased quality and only serve to restrict
professional mobility and lessen competitiveness.
One of the few entry barriers to hold promise for
assuring competent practice is experience. However, the
existing evidence indicates that licensing agencies have
adopted experience requirements in an arbitrary manner,
thus suggesting that this barrier is anti-competitive, as
28
well.
There is some evidence that as a result of these
barriers, consumers must pay increased costs for these
services. These effects have not been demonstrated in all
cases, but the general price-increasing effects have been
documented in the health care field.
2. Lack of quality control
One of the major justifications for occupational
regulation is quality assurance. Two basic arguments are
used by public interest theorists to warrant quality-
oriented licensing regulation. First, regulation is
intended to assure that minimum quality levels are met so
that society is protected from potentially negative effects
of individual decisions. For example, incompetent
practitioners in the health care field can cause epidemics ;
in the engineering field, improperly designed buildings can
collapse and cause extensive deaths and injuries. The
second justification is that licensing protects individuals
from harm by incompetent practitioners. It is argued that
consumers must be protected because the liability system
does not provide adequate redress in the event of negative
outcomes caused by incompetent practitioners.
The relationship between licensing and quality is
unclear at either level. Friedman (1962) argues that
society is not very well protected since the imposition of
29
licensing restrictions may cause price increases that
reduce accessibility to the service. Individuals may thus
be forced to do without service or use a lower quality
product (such as an unlicensed producer). Society may then
assume the costs of this lessened access (e.g., the spread
and/or severity of epidemics may be greater than in the
absence of licensing).
In the second case, Rottenberg (1962) makes the
argument that licensing may result in higher quality for
the lowest quality providers, while allowing the quality of
superior providers to deteriorate. Depending on the
numbers of practitioners in each category, the aggregate
effect may be negligible, or even negative.
To the contrary, Leland (1979, 1980) argues that one
of the positive by-products of the licensing process is a
gradual increase in the quality of services offered by the
professionals. He reasons that barriers to entry will
secure rents for practitioners thus calling attention to
the lucrative nature of the profession. New, better
qualified practitioners will seek to join this attractive
field, and the quality of the field will increase. Of
course, Leland assumes that the entry barriers will not be
so severe that no new practitioners enter the field, nor
does he argue that this process is necessarily efficient.
In fact, he argues that if the profession or industry sets
the quality standards, they are likely to be too high and
30
may result in inefficiency.
Few of the theoretical arguments regarding the
relationship between licensing and quality assurance have
been tested empirically, and those that have been reported
yield ambiguous and sometimes conflicting outcomes. The
discussion which follows considers first the general
research on the topic, and then concentrates on research in
the health care arena.
Most tests of the relationship between licensing and
quality control have suffered from the inability to
properly measure the quality variable. Few of the studies
incorporate an outcome dimension to this definition. In
one of the few studies which used outcome measures, the
Federal Trade Commission study of television repair found
quality increases due to regulation (Phelan, 1974).
Carroll and Gaston have investigated the relationship
between licensing and quality for a number of professions.
According to their research, licensing has had a negative
effect on the quality of real estate brokering services
(1979), and electricians, plumbers, and dentists (1981a).
However, in a review of the legal profession, they found
that states with more restrictive licensing policies had
better quality rankings (using a national peer review
system), lower malpractice rates and fewer disciplinary
actions (1981b). All of these studies suffer from
questionable proxies for quality, although the researchers
31
operate within severe restrictions regarding data
availability.
Research on the quality effects of health profession
licensing is particularly hampered by difficulties
presented in defining, operationalizing and measuring
quality-related variables. In a rare exception to the
rule, Holen (1978) found that states with more stringent
entry barriers to the dental profession (measured by high
entrance examination failure rates) had better quality.
The study used two good measures of quality (lower
malpractice rates and better dental health). On the other
hand. Begun (1980) found a positive relationship between
licensing and optometric services, but he defined quality
of care using process measures.
Again, as with so many of the issues addressed to this
point, the conflicting findings of these studies renders
conclusions regarding the relationship between licensing
and quality premature. Further empirical tests of the
theoretical arguments are required.
3. Information restrictions
Free-flowing information is a critical component of a
competitive market. Theorists agree that in the absence of
adequate information, the consumer will pay an inflated
price for goods and services (see Stigler, 1971; Nelson,
1970; and Maurizi, 1976). Licensing has been proposed as a
32
method to alleviate significant information inadequacies in
some service areas. The licensing credential assures the
consumer that the producer meets minimum standards
identified by the regulatory agency (Moore, 1961). On the
other hand, it has been argued that stringent and extensive
professional control impedes information flow, thus
decreasing competition and increasing prices (Benham and
Benham, 1975).
Using licensing to provide consumer information has
significant limitations. First, the consumer only receives
information about the capability of the producer at the
time of licensure ; over time these capabilities may erode
without notice to the consumer. Second, the use of
"grandfather clauses" permits many existing practitioners
to continue their practices even though they may not meet
the initial requirements. Third, licensing does not
provide consumers with any information about the different
skills and abilities of producers who exceed the minimum
requirements (Moore, 1961).
Licensing boards rarely provide information beyond
confirmation of licensure. To the contrary, licensing
boards have restricted the availability of information by
adopting policies which limit professional advertising
(Benham and Benham, 1975; Shimberg, 1982; Gross, 1984).
The empirical literature testing the effects of advertising
restrictions on price is instructive.
33
Much of the research on information provision in the
health care field has focused on optometry. Benham (1972)
found that prices for eyeglasses and eye examinations
varied significantly depending on whether advertising
restrictions were imposed by licensing authorities ; states
that permitted price advertising had prices 25-40% lower
than states that did not. Feldman and Begun (1978) found
that price of optometric services was about 5% higher in
states which banned advertising, holding quality constant.
Bans on optician price advertising resulted in a 10%
differential. Benham and Benham (1975) found that
advertising constraints result in higher costs for
consumers (as much as 25 to 40% in tightly controlled
markets) and reduced utilization.
However, the loosening of advertising restrictions may
not provide a complete solution to these problems : Leffler
(1981) found that advertising may generate negative
outcomes, too. In his review of the prescription drug
field, he determined that advertising retarded the use of
generic drugs, keeping prices artificially high. But this
perspective has not been reinforced by research in other
areas of the health care industry.
In the past, professional codes of ethics and
licensing restrictions have not allowed advertising by the
professions, but recent Supreme Court and Federal Trade
Commission opinions have made such restrictions illegal
34
(Bloom and Stiff, 1981). The involvement of the federal
government through court and regulatory agency opinions has
resulted in considerable change on the part of occupational
licensing boards. Many of the boards have removed practice
restrictions on advertising (such as might be present in
board-adopted codes of ethics). As Bloom and Stiff point
out, additional advertising activity on the part of health
professionals is likely. However, many licensing boards
have been slow to change their policies against advertising
(Shimberg, 1982). In some cases, the boards have crafted
"guidelines" with such complexity that practitioners avoid
advertising in fear of violating these policies.
Ideally, licensing boards would encourage the use of
advertising as a means to inform consumers about the
differences between producers. At the very least, boards
should broadly disseminate information about incompetent
practitioners so that consumers can avoid them. Health
boards have been reluctant to broadcast such information
because professionals have adopted an attitude that
discipline is only required when the public has become
aware of incompetence (Gross, 1984). When the public is
unaware of incompetence, professionals seem to believe that
there is no need to call attention to it through public
proceedings. Of course, since the public is generally not
informed of these incompetent acts, there is no need for
permanent disciplinary action since the public is likely to
35
forget the act anyway. Such situations place consumers in
an unwinnable predicament; they are unable to find out
about these incompetent acts, so they can not improve their
decision-making capabilities.
To summarize, the health literature seems to support
the use of advertising as a means to encourage price
competition, but licensing boards have been reluctant to
encourage the dissemination of such information. Empirical
tests regarding the use of other information instruments
(e.g., public assessment of professional competence and
publication of disciplinary actions against incompetent
practitioners) have not been forthcoming.
Reforming Occupational Regulation
The previous discussion highlights some of the most
troublesome effects of licensing, yet there are good
reasons for the maintenance of licensing programs for some
professions. Most licensing programs at least protect
society and individuals from the worst practitioners and
there is a legitimate argument that licensing does provide
the consumer with information about basic competencies at a
low search cost.
Nevertheless, public policy analysts, decision-makers,
and researchers have been concerned about the costs
generated by occupational licensure. A number of reforms
have been proposed (and some enacted by various state
36
legislatures) in order to attenuate these problem areas.
Most of the reforms appear to focus on reducing the costs
of regulation for the consumer by eliminating unnecessary
practices and bolstering advantageous systems. The reforms
may reflect a move toward a fundamental shift in the
balance between consumers and producers.
The following narrative focuses attention on seven
reforms: imposition of continuing education requirements
on the professions, recertification requirements, enhanced
roles for physician substitutes and complements, the repeal
of regulation and consequent reliance on legal remedies for
consumer protection, the addition of public members to
regulatory boards, centralization of the administrative
function of regulation, and sunset review activity. The
literature regarding the effects of these reforms will be
examined in each of the sections which follow.
1. Continuing competence
As noted previously, critics of occupational licensure
have expressed concerns regarding the limitations of
permanent licensure based on the narrow testing that occurs
when professionals begin their careers. It seems
incongruent that drivers are required to take periodic re
examinations, yet there is no similar requirement for
physicians (Kessel, 1970). Shimberg, et al. (1973) make
the point even more directly :
37
It is ironic that the very groups which insist on
higher standards for newcomers to an occupation
should take the vigorous stands they do against
reexamination of those already licensed. It appears
that a genuine concern for protection of the public
would demand that all licensed practitioners
demonstrate periodically that they have kept abreast
of new developments in the field and have maintained
their skills (p. 237, emphasis author's).
As early as 1967, the Report of the National Commission on
Health Manpower discussed two methods for assuring the
continued competence of physicians: adequate performance
in continuing education efforts; or, periodic re
examinations (Forgotson, et al., 1967).
Professionals have been notably reluctant to pursue
re-testing. First, many professionals specialize once they
have been licensed and over a period of years simply forget
the basic material that is likely to be included in such an
examination (Shimberg, 1977). Second, some of these
professionals resist re-testing because it presumes
incompetence; they believe that the absence of complaints
or malpractice actions against them attests to their
abilities. Licensing agency staff have been reluctant to
encourage re-testing because of legal and administrative
concerns, not to mention cost (Shimberg, 1976). As a result
of these considerations, some state legislatures have
turned to programs of continuing education in an attempt to
assure continuing competence of licensed professionals.
Gross (1984) points out that continuing education was
shifted from a voluntary effort to a mandatory requirement
38
as a means to ensure that all practitioners "kept up" with
new discoveries in their field. However, this approach is
built on several tenuous assumptions. First, one must
assume that professionals will take courses related to
their field. Present evidence reveals this as a faulty
assumption, since licensing agencies generally do not
monitor continuing education credits very carefully and the
practitioner may obtain credit for marginally relevant
courses like office management or personal financial
management (Gaumer, 1984; Professional Regulation News,
1985). Second, it must be assumed that the professionals
know their shortcomings and will take courses that mitigate
these inadequacies. Third, it must be assumed that
coursework is subsequently transferred to daily practice.
The third point seems most important, since continuing
education requirements have been enacted to enhance
professional performance capabilities. The evidence on
this point indicates a weak relationship between such
requirements and performance. From a general standpoint,
Williamson (1976) reported that expectations of transfers
of knowledge gained in the classroom to actual practice
have been found unrealistic, since there is no evidence
that continuing education changes students' behavior. For
a health-specific view, a study by Bertram and Brooks-
Bertram (1977) comprehensively reviewed all articles
published between 1960 and 1977 whose titles suggested that
39
they assessed continuing education. Limiting their review
to articles that dealt with continuing education for
physicians, they found only 29 studies with true or quasi-
experimental designs. Of these, only six studies reported
positive effects from the coursework, and only three
studies reported positive effects at or beyond six weeks
from the program's conclusion.
Various states have mandated continuing education for
professionals in recent years, but there appears to be
considerable variation among the professions. While some
professions like law, accountancy, and pharmacy have
experienced a substantial increase in the number of states
requiring continuing education, other occupations like
medicine have been virtually stagnant (Jaschik, 1986). In
some cases, it is likely that legislators and licensing
staff members have questioned the utility of these
requirements and have avoided the imposition of new
mandates (see, for example, Colorado Department of
Regulatory Agencies, 1979 or California Department of
Consumer Affairs, 1982).
Continuing education requirements engender
considerable costs to professionals that must be assumed to
be passed on to consumers. The California Department of
Consumer Affairs (1982) has calculated the annual direct
cost of continuing education coursework for physicians in
the State of California alone to be $110,232,000! This
40
estimate does not even include income losses by the
professionals attributable to attendance. Given the
tenuous connection between classroom and office, it is no
surprise that continuing education requirements are
increasingly scrutinized.
2. Certification
An alternative approach to the issue of continuing
competence encourages the voluntary certification and re
certification of professionals by associations of
specialists. Many physicians have pursued specialty
certification in the past as a way to demonstrate skills
and abilities in particular areas of medical practice.
Those physicians that can demonstrate their skills to the
satisfaction of their peers can become "Board certified."
A more recent phenomenon advocates the use of the
certification process as a means of assessing continuing
competence. In this case, certified professionals would be
required to demonstrate their competence on a regular
basis, rather than the present one-time barrier.
Falk, Weisfeld, and Tochen (1980) discuss the
initiation of recertification efforts by a number of
medical specialty groups:
In March 1973, the membership of the American Board
of Medical Specialties passed a resolution urging
that voluntary periodic recertification of medical
specialists become a standard policy of all member
specialty boards. By 1974, all 22 primary and
_____________________________________________________________________________41_
conjoint boards endorsed recertification in
principle. By the end of 1978, 15 boards had
established dates for recertification, and five
boards had actually conducted recertification
procedures. Recertification mechanisms of nine
boards were approved by the American Board of Medical
Specialties by late 1979. (p. 12)
On the other hand. Gross (1984) indicates that the
recertification "boom" was still-born--very few of the
medical specialties have followed up with significant
recertification efforts,2 and those that have depend on
either voluntary programs or toothless efforts which depend
on questionable assessment tools such as continuing
education, and self-assessment examinations. Few of the
specialty boards use practice audits or other competency-
based assessments. The American Board of Family Practice
is one of the few specialty boards which requires periodic
review of all certified physicians (there are no
grandfathered practitioners) based on an assessment of the
actual performance of the physician.
It appears that professionals will continue to resist
mandatory certification and recertification because of the
considerable risks to their livelihoods. This remains one
2a July, 1986 update of recertification requirements
of medical specialty boards indicates that there is
virtually no change from the information reported by Falk,
Weisfeld, and Tochen: only one board was actually
conducting recertification at that time, although eight
others were projected to begin recertification in 1986 or
1987 (Ayers, 1986).
42
of the areas of strongest concern for these professionals.
3. Enhanced role of substitutable professions
Consumers frequently substitute one product for
another when they can be convinced that the substitute
meets their needs as well as the original (and may be less
expensive). As long as the consumer knows about any price
and quality differences, such substitutions can be in the
consumers' best interest (Shaked and Sutton, 1981).
Occupational licensing agencies tend to restrict the
availability of substitutes for services offered by
licensed professionals. Licensing boards generally take
the position that such substitutes represent inferior
alternatives to professional services and should not be
allowed to compete with those licensed by the state. As an
example of the restrictive approach that licensing boards
tend to adopt, DeVany, et al. (1982) found that states tend
to restrict the number of dental hygienists that any one
dentist is allowed to supervise. Similar restrictions
exist for nurse practitioners and physician's assistants in
many of the states. Further, not all states even allow
these substitutes to practice.
Two primary issues prevail in this debate: price and
quality. Are these substitutes less costly than the
professionals they supplant? Do they provide more
efficient services? Do they provide a lower quality of
43
care than the professionals? Evidence on these questions
seems rather compelling in favor of making more substitutes
available, yet licensing boards still adopt policies which
retard their use.
Substitution of professionals for certain types of
noncritical work can result in considerable efficiency
gains. For example, the dentist that hires a dental
assistant to clean patients' teeth is allowed to devote
attention to more difficult cases that the paraprofessional
may not be prepared to serve (Meier, 1985). The evidence
on the efficiency gains generated by substitutes supports a
loosening of practice restrictions.
Benham and Benham (1975) found that lower prices were
obtained by consumers in states that allowed opticians to
practice. Maurizi, et al. (1981) found that states with
commercial eyeglass dispensers enjoyed reduced prices.
Record, et al. (1980) provided extensive evidence that
physician substitutes are capable of providing a large
portion of primary care services at a considerable savings
to the consumer. These cost savings are even more
impressive when the social costs of educating the different
primary care providers are factored into the estimates.
Sox (1979) conducted an extensive review of the
clinical literature and found that quality of care would
not suffer if licensure policies were selectively
liberalized allowing mid-level practitioners to perform
44
some tasks now reserved only for dentists or physicians.
Sox's review of the literature does recognize the
limitations of these studies--most were done in an office
setting, while many nurse practitioners and physician
assistants practice in emergency rooms and hospitals. In
addition, there were no studies that compared performances
of nurse practitioners and physicians assistants directly;
all comparisons involved physicians. Sox also mentioned
study limitations with respect to the assessment of
quality, since most of the studies only involved a limited
number of patients and there are few commonly accepted
quality measures.
Existing evidence on the use of dental auxiliaries
reinforced their potential use on a large scale, because of
significant output gains at comparable quality levels
(Feldstein, 1974). Feldstein hypothesizes that the
restrictive nature of most state dental practice acts and
the conservative attitudes of most dentists generate
barriers to expanded use of auxiliaries. Similar arguments
can be made for other health professions, notably
acupuncturists (McCrae, 1982) and midwives (Gross, 1985).
White and Marmor (1982) point out several reforms that
would reduce entry restrictions for paraprofessionals.
First, paraprofessionals could participate in subsidized
formal training programs conducted outside the workplace.
Second, they believe that better task analyses will produce
45
evidence regarding the capabilities and limitations of
these paraprofessionals. Third, partly as a result of
these analyses, existing regulations might be relaxed in
order to encourage experimentation.
To summarize, it appears that professional substitutes
for physician services are tenable, although they have not
proliferated to the degree possible. While few studies
have empirically investigated the cause of such limited
development, the literature consistently notes the role of
restrictive licensing practices.
4. Reliance on legal remedies
Some critics of occupational licensing consider
existing legal remedies adequate to protect consumers
against fraud and incompetence (Friedman, 1962; Gellhorn,
1976). They argue that providers will maintain high-
quality practices to avoid malpractice suits and criminal
charges.
Others find these arguments less than compelling
(Shimberg, 1982; Gaumer, 1984). First, providers may be
forced into a position of increasing their tendencies
toward defensive practices. As it is, defensive medicine
constitutes a considerable financial investment, all of
which must be considered inefficient since, by definition,
these practices are unnecessary. Second, very few
physician-inflicted injuries result in any type of
46
malpractice action (it has been estimated that only 6
percent of all such injuries generate malpractice suits),
leading one to conclude that there are still significant
information inadequacies in the health care field (Gaumer,
1984). Until these inadequacies are resolved to some
degree, legal remedies are unlikely to provide adequate
consumer protection.
5. Public membership
The governor of each state is usually responsible for
appointing members of occupational licensing boards,
although some states may require the governor to consult
with various organizations prior to completing
appointments. The legislative empowerment act determines
the composition of the boards, however governors usually
have considerable latitude in the selection of the actual
representatives. In the past some state laws have required
the governor to appoint members of professional
associations (e.g., the state medical association), though
few states still mandate such representatives.
In 1971, most of the health occupational licensing
boards were composed exclusively of practitioners of the
licensed profession, in some cases due to legislative fiat
(Forgotson, et al., 1971). The professions have been very
successful in negotiating licensing statutes so that most,
if not all, of the positions on licensing boards were
47
allocated to members of the profession (Cohen, 1975). As a
result of criticisms that this domination of licensing
board composition by the regulated professionals encouraged
capture of the regulatory process, some states revised
their laws to require public membership on the boards.
Existing research which assesses the effects of public
membership reforms is sparse, limited to very few
professions, and subject to considerable methodological
constraints. An early study of this reform sought to
determine whether composition of licensing boards affected
occupational income. Pfeffer (1974) found very weak
support for the hypothesis that higher proportions of
public members on licensing boards result in lower income
for barbers, plumbers, realtors, architects, and teachers
(both elementary and secondary school). The study suffered
from several limitations. First, the study analyzed data
from 1950 and 1960, years in which few public members sat
on occupational licensing boards. Second, the consumer
movement of the 1970's may have emboldened public members,
generating different results in a more contemporary
setting.
Schütz (1983) investigated the effects of increased
membership on licensing boards on a series of output
measures, including the number of applications and
examinations, pass rates on exams, and the number of
complaints against practitioners. No significant effects
48
were found for increased public participation, instead,
Schütz discovered that institutional factors (number of
employees, number of licensees, and agency budget) had the
most significant effects.
There are some substantial limitations to this study,
also. First, the study only encompassed the two years
prior to the increase in public membership and the two
years following the increase. Given the difficulty of
finding, appointing, and then training and orienting the
new public members, it is not surprising that no effects
were found. In fact, it is likely that many of the public
member seats remained vacant during the entire study
period, if past performances regarding appointments were
duplicated (Shimberg, 1982). Second, even if the public
members were seated and oriented immediately, it is not
likely that they would have been active immediately. It is
much more likely that the new public members would take
some time to become well acquainted with board
responsibilities before seeking significant reforms.
Third, the study only included boards from one state
(California), which may not be representative of other
states.
hammers (1985) sought to determine the extent to which
public board members might influence policies of boards
regulating nursing home administrators. Again, he found
very few significant effects. In fact, public members were
49
found to affect only one regulatory policy : the
extensiveness of the agency's continuing education
requirement. However, this effect was opposite the
predicted direction-- the higher the proportion of public
members the less continuing education was required. Again,
it is important to note that this study was limited to one
profession (nursing home administrators).
One final study appears to be relevant to the issue of
public membership on licensing boards. Chesney (1984)
examined a number of state health regulatory and policy
setting boards in the State of Michigan. He found that
consumers generally prefer to serve on boards with purely
advisory responsibilities while provider members seek
boards with quasi-judicial authority. He concluded that it
may be difficult to obtain and retain public members on
occupational licensing boards because of their function--
they involve highly contentious proceedings with important
ramifications for specific individuals. This finding (if
it is reinforced by other studies) leads one to expect few
major policy shifts as a result of introducing or
increasing public membership on licensing boards.
In summary, the existing studies of the impact of
public membership on licensing policy are not encouraging,
since few significant effects have been shown. However,
each of the studies suffers from substantial methodological
limitations. Apparently, there have been no studies which
50
comprehensively assess public membership effects for boards
licensing primary health care providers.
6. Centralization of the administrative function
In the past, health licensing boards have generally
enjoyed total autonomy and as a result had "considerably
stronger links to their respective professional
associations than to other public agencies concerned with
health services" (Forgotson, et al., 1971, p. 30). During
the period of strong consumer interest in the late 1960's
and early 1970's a trend toward centralization of the
licensing function began. A few states had consolidated
their licensing activities prior to that time, but most
boards operated as autonomous entities (Council of State
Governments, 1968).
Four arguments have been used to support the movement
toward centralization : administrative efficiency,
coordination, oversight, and accountability (Roederer and
Shimberg, 1980).^ Licensing operations are made more
^Roederer and Shimberg (1980) surveyed members of both
centralized and decentralized occupational licensing
boards, in order to identify the strengths and weaknesses
of these organizational options. It is interesting that
supporters of decentralized agencies used substantially
similar arguments to support their positions. Respondents
isolated four arguments in favor of autonomous
(decentralized) boards: the need for professional
expertise, administrative efficiency, insulation from
political interference, and accountability.
The respondents to their survey indicated that
autonomous boards are more likely than centralized boards
51
efficient through the consolidation of part-time or under
utilized board staff. Centralization permits the
automation of similar functions (e.g., license renewal) and
a prompt and orderly work flow. These efficiencies allow
the agency to devote more resources to expediting
complaints and investigations.
A central agency can provide a focal point for
licensing policy in the state. Both the executive and
legislative branches of state would be cognizant of the
single policy instrument and would be more able to
implement a comprehensive position regarding decision-
to have the expertise necessary to adequately evaluate
potential regulatory decisions. These members argued that
the specialized nature of these professions required
training in the profession and an "understanding of the
process of caring for patients/delivering services to
consumers" (p. 10). Centralized boards might not recognize
long-term effects of decisions on the public interest.
Respondents argued that centralization may result in
inefficient, rather than efficient, operations.
Inefficiencies could result because of the need to hire
additional staff and administrators and through the
cumbersome nature of large bureaucracies. Those surveyed
expressed a concern that consumer complaints might be lost
in the bureaucratic maze. It was felt by some that the
autonomous boards enjoyed a greater visibility than the
consolidated boards and would be more likely to attract
consumer complaints.
Respondents believed that centralized boards were more
sensitive to political pressure than autonomous boards.
They were particularly concerned that "people with
political motivation would make decisions which are better
left to persons dedicated to upholding high professional
standards" (p. 11). Related to this concern was their fear
of losing accountability. Respondents indicated that
centralization could generate tremendous power for a
particular individual (the governor) or political party,
without adequate oversight by the state legislature.
52
making and resource allocation. Further, centralized
agencies provide a single entry point for consumer
complaints, assure due process in disciplinary proceedings,
and can coordinate the development of standard operating
procedures.
The development of oversight mechanisms in centralized
agencies can assure the protection of consumers in areas in
which autonomous boards were previously criticized (e.g.,
reciprocity, examinations, and foreign graduates). It is
argued that centralized agencies increase public
accountability because this mechanism focuses legislative
review on budgets, rules, and agency accomplishments. In
addition, centralized agencies are less likely to be
influenced by professional lobbyists since staffs are not
likely to be members of the regulated profession.
Although these arguments may appear to be compelling,
few tests of these propositions have been undertaken in the
health licensing field. Only one study in the licensing
field specifically included a centralization component. In
that study of the regulation of nursing home
administrators, centralized agencies appeared to produce
stricter licensing regulations and more license revocation
decisions (hammers, 1985).
In summary, there are theoretically important reasons
for licensing boards to centralize their administrative
operations. Unfortunately, these arguments have not been
53
empirically tested.
7. Sunset review
Sunset review legislation became popular in the late
1970's as a means to evaluate the usefulness of existing
regulation. This legislation required legislative or other
special staff to review state agencies' regulatory
activities to determine whether their benefits exceeded
costs. Sunset laws mandate that programs that are not
actively renewed as a result of this analysis automatically
terminate. Proponents of this approach hoped that such
reviews would result in the elimination of unnecessary
regulation and thus strengthen market forces (Roederer and
Palmer, 1981).
Recent evidence shows that the sunset review process
resulted in the abolition of very few agencies and few
regulatory policy revisions. Martin (1979) reviewed
cumulative figures for 1978 in 15 states with sunset laws
and found that out of 182 regulatory agencies reviewed, 54
were recommended for termination by legislative staff.
State legislatures only terminated 21 of these agencies.
Roederer and Palmer (1981) found that most of the important
changes wrought by sunset review laws were in areas like
management practices, rules and regulations, and public and
legislative awareness. Slaughter (1986) reviewed the
results of the last two cycles of the Texas sunset review
54
agency and determined that the state legislature accepted
far more procedural changes than substantive ones. While
these changes may make the regulatory agencies more
efficient, it is not clear that they affect substantive
policy issues. Supporters of the sunset review process
argue that these changes will make the regulatory system
more effective and efficient (Slaughter, 1986).
While it is not clear that sunset review procedures
have significantly affected the outcomes of regulation,
there may be more evaluative research completed in the 35
states that have adopted it (Gaumer, 1984). There is no
evidence that any of these states have resolved the primary
problem inherent in the review: how to measure
effectiveness. Until analysts generate some consensus on
regulatory effectiveness measures, such reviews are likely
to focus on marginal changes.
Conclus ion
It is clear that occupational licensing has not
provided the expected level of consumer protection and that
the existing protection has been purchased at a dear price.
Reforms of the licensing process have been enacted by some
state legislatures, even in the face of significant
opposition by the medical community, but there has been no
research to determine whether these programs have
accomplished their objectives (Gaumer, 1984). This
55
dissertation assesses the extent to which two reforms in
particular (the addition of public members to licensing
boards and the centralization of the administrative
function) have produced significant impacts. The next
chapter delineates the theoretical support for the testing
protocol.
56
Occupational Licensing Reform Theory
State legislators and licensing board members can
approach possible reforms from several different
perspectives, depending on their orientations and
expectations. Individual decisionmakers can take advantage
of the reform process to achieve many different objectives:
to make the system respond to consumers rather than members
of the regulated profession; to solidify the profession's
hold on the regulatory process ; to make the licensing
process more efficient ; to raise minimum quality levels of
the profession; and/or to increase competitive forces
within the market. Obviously, these objectives may
conflict with each other, and, in the case of multiple
sequential or simultaneous reforms, may cancel each other.
The purpose of this chapter is to consider how these
expectations may operate in the instance of two particular
reforms: the addition of public members on the licensing
boards and, centralization of the licensing process. These
reforms have been selected from among the many reforms
introduced in the 1970's because there has been a trend by
states to adopt these reforms (Shimberg, 1982; Gaumer,
1984), even though their specific effects are unclear.
These two reforms appear to represent an effort by
legislatures to moderate the capture of the licensing
process by the regulated and an assessment of actual
_____________________________________________________________________________57
effects may contribute to the debate involving these
intentions•
In this chapter, the theoretical bases for the
following questions will be explored:
--what effect(s) can be predicted as a result of
the inclusion of public members on occupational
licensing boards?
--what effect(s) can be predicted as a result of
centralization of the administration of
occupational licensing activities ?
--what factors influence these effects ?
The first section of this chapter briefly reviews
three competing theories of regulation and argues that the
public interest and private interest (or capture model)
theories represent extreme views of regulation, with the
political market theory somewhere in the middle. The
second section uses the four dimensions of the public
interest defined by Wolfson, Trebilcock, and Tuohy (1980)
to explain shifts in the balance between public and private
interests and to predict the impacts of reforms addressing
licensing board membership and licensing agency
centralization. The third section describes the theories
which may explain why these reforms may reduce occupational
licensing restrictions enacted by state legislatures. The
fourth and final section characterizes the theories which
may explain why these reforms may moderate restrictive
58
licensing board policies. Each of the final sections
detail the different institutional, political, and social
variables that might impede or facilitate this changing
balance.
Competing Theories of Regulation
There are three main competing theories of regulation.
The first theory attempts to explain the imposition of
regulation as protection of public interests. Basically,
this theory speculates that without regulation the market
would fail due to information inadequacies and
externalities. Thus, regulation is necessary to compensate
for these market weaknesses.
The second theory of regulation explains regulation as
protecting the interests of the regulated. This theory
asserts that members of the profession seek regulation as a
means of increasing prestige and limiting competition.
Theorists who support this notion argue that the regulated
profession "captures" the regulatory process and stimulates
the development of policies advantageous to the profession.
These theories represent the extremes of an
explanatory continuum. A middle view is embodied by a
third theory, sometimes known as the "political market"
(White, 1979b). This model explains regulation as
emanating from a constant struggle between competing
political interests, yielding a balance or compromise which
reflects the relative strengths of the affected parties.
59
This study attempts to explain occupational licensing
reforms in the health field using the political market
approach.
The New Balance
Much of the U.S. occupational licensing legislation
(particularly in the health field) was enacted in the early
20th century. As Benham and Benham (1978) have noted,
these legislative initiatives reflected moves by the
professions to codify guild-like relationships and to
improve professional prestige. Since the motivation for
occupational regulation originated with the professions,
consumers rarely expressed any interest in the legislation.
As a result, some have characterized the health professions
as a "sovereign" field in which the control of practice was
almost exclusively vested in the health provider (Starr,
1982).
It can be said that until the 1970's, most consumers
simply weren't aware of the regulatory environment in
general and the potentially harmful effects of occupational
licensing in particular. As the public has become more
sensitive to regulatory issues, the interests of
professionals and consumers have become more difficult to
reconcile and significant efforts to modify the balance
between them have been undertaken.
The "public interest" is notoriously hard to define
60
because it is tied to factual and value-laden issues that
change over time (Okun, 1975). However, Wolfson,
Trebilcock, and Tuohy (1980) have identified four
dimensions of the "public interest" that can be used to
reveal changes in the definition as it relates to
occupational licensing: efficiency, fairness,
practicability, and accountability. Definitions of these
terms provide perspective on the changing balance between
the two factions and can guide research questions designed
to elicit information regarding the potential effects of
two regulatory reforms : the addition of public members to
licensing boards and the centralization of the
administrative structure of licensing. The central
question to be addressed in this study is: have the
reforms contributed to a rebalancing of the system, or does
the system still tilt in favor of the original interest
groups that spawned the creation of the regulatory system?
The following discussion of the four categories seeks to
explain how the reforms could potentially correct the
imbalance.
Efficiency. Wolfson, Trebilcock, and Tuohy define
efficiency in the familiar terms of Pareto optimality. In
their view, public policy should seek to minimize costs and
maximize benefits so that no individual can be made better
off except at another's expense. Evidence in the
occupational licensing literature has demonstrated
61
efficiency problems in several areas : the existence of
rents, unnecessary entry restrictions, and inefficient
regulatory administration.
Various authors have demonstrated that physicians have
generated rents as a consequence of licensing (Friedman and
Kuznets, 1945; Leffler, 1978). If regulatory reforms have
successfully modified the balance between consumers and
producers, a gradual decline in rents would be expected.
Noether (1986) investigated this question and determined
that, in fact, physician rents have declined recently.
One of the major areas of public member interest
should be in assuring a legitimate linkage between
licensing restrictions and performance, especially since it
appears that many of these restrictions increase consumer
cost without affecting quality. The public member
(ostensibly representing the public interest) should seek
to eliminate restrictions that have little or no relation
to the quality of the delivered product. The public member
is likely to foster board reform in areas of interest to
consumers by questioning the basis for board policies. The
act of articulating the reasoning behind board policies,
rules, regulations, and restrictions may illustrate their
indefensibility to other board members and highlight the
{need for revision.
Other authors have linked unnecessary entry
restrictions with attempts by professionals to limit
62
competition (Shimberg, et al., 1973; Rayack, 1976; White,
1979b). The impact of these restrictions would be lessened
or completely eliminated if the enacted reforms are
oriented toward consumer protection.
There is also the issue of regulatory efficiency.
Producers have a direct interest in reducing inefficiency
since most licensing agencies are supported to some degree
by licensing fees paid by licensees. Consumers have an
indirect interest in the efficiency issue since those costs
are passed on to them. Therefore, if legislators are
sensitive to these issues, regulatory reforms can be
expected to generate increased efficiency by regulatory
agencies, reflected in declining unit costs.
Centralization holds promise as a reform that
increases administrative efficiency since scale economies
are likely to accrue. Scale economies should result from
centralization because many functions of licensing agencies
can be automated and/or do not require substantive
expertise. For example, license renewals, monitoring of
continuing education activities, and other administrative
functions can be easily centralized, resulting in
efficiency improvements. Centralized agencies are likely
to attract more highly qualified staff members since larger
agencies can offer enhanced career paths and
specializations that are unavailable in decentralized
agencies. Producers have resisted centralization reform
63
efforts because they fear a loss of sensitivity to the
particular problems of the regulated profession (Shimberg,
1976) .
Fairness. The focus here is on due process. Wolfson,
et al. argue that public policy should attempt to assure*.
1) equal treatment for all in similar situations, 2) due
process, and 3) recognition that regulatory changes require
existing licensees to incur costs which should be
considered. (Distributive justice and equity are two
concepts specifically excluded in their definition.)
If one accepts this definition (particularly the first
element), differences between states in regulatory
practices should moderate. If the reforms generate
consistent treatment, the states will develop similar entry
restrictions, and will standardize their on-going quality
monitoring process to the extent possible.
States which adopt board membership and centralization
reforms may enhance regulatory fairness. The public member
can reduce the occupational control of the regulatory
process by monitoring board actions and encouraging
accountability efforts. Fostering communication between
boards and consumers and policing the disciplinary process
to ensure the removal of professionals that might endanger
the public through incompetence would further assure fair
and consistent treatment.
States which centralize licensing administration
64
should maximize fair and consistent treatment of
individuals (both consumers and producers) because of a
tendency to standardize administrative procedures across
professions and through increased knowledge of legal
requirements for due process. Centralized agencies are
likely to be consistent in their approach to complaints and
disciplinary actions as a result of this knowledge.
Practicability. This dimension highlights the ease
with which policies can be implemented and the effects of
incentives on administrators. This definition of
practicability appears most relevant for the centralization
reform.
If the regulatory reforms have resulted in more
practicable statutes, regulations, and policies, the
administration of the licensing process will be
facilitated. For example, consumers should better
understand the complaint and disciplinary process,
resulting in both increased complaints and faster
dispensation of disciplinary actions. In addition, the
centralization reform may generate pressure on
administrators to demonstrate effectiveness.
Administrators may encourage consumer complaints and
aggressive disciplinary investigations and actions to
indicate their sensitivity to the public interest.
Accountability. Those who make policy decisions
affecting the public should be held accountable for the
65
effects of those decisions. Principle tenets of public
accountability are effective representation and information
dissemination.
Thus, in reform states it can be expected that
licensing boards would develop new methods of disseminating
information about the licensing process and would improve
quality assurance efforts. These methods would seek to
inform the public about how to complain about substandard
care and about incompetent and dangerous practitioners.
Enhanced communication between consumers and producers is
imperative in a regulated environment since regulation
tends to blunt the normal market adjustment process.
Communication lines can be opened or enhanced through the
use of newsletters, press conferences, press releases,
public hearings, and meetings with interested consumer
groups.
Another element of accountability may be offered
through centralization. The consolidation of numerous
small regulatory agencies results in a few large, visible
budgets that can attract considerable attention in the
legislative oversight process, thus potentially increasing
agency accountability. Centralized staffs may result in
greater accountability to the public because they are
likely to be specialists and/or careerists who are less apt
to be members of the regulated profession, or to seek
employment with the profession. A centralized staff should
66
be more interested in responding to the needs of the public
(although the public may by represented by elected
officials, in most cases), than the needs of the
profession.
Thus, if the two reforms have resulted in a new
balance toward the public interest, a number of changes in
the operations of licensing boards can be predicted. In
summary, centralization reforms should generate increased
regulatory administrative efficiency, standardized and
improved quality monitoring, and increased fairness. Board
membership reforms should result in reduced entry
restrictions, increased producer quality and increased
licensing board accountability.
Legislative Versus Board Activity
There are two main areas in which the impact of
reforms regarding public members and centralized agencies
can be felt: the adoption of reform legislation and the
development of board policy which enhances reform
legislation. The former requires legislative action which
takes place in the public eye and involves a broad spectrum
of actors and issues. The latter is less public and more
subtle, since the implementation of legislation can be
technical and esoteric even when compared to the
legislative process.
The political, institutional, and social factors that
67
may facilitate or impede reforms will not necessarily
operate in both domains. Some will be important in the
legislative arena, while the principal effects of other
factors may be on board policies. The following sections
reflect this emphasis, with the first section focusing on
explanatory theories in the legislative domain and the
second section addressing tests of board policies.
1. Legislative activity
Legislators are primarily concerned about one
activity: election. Successful politicians assure
election by balancing competing interests (Tullock, 1965;
Lowi, 1969; Feldstein, 1 977). Legislative decisions about
licensing are thus primarily affected by the competitive
aspects of obtaining and retaining office. However, the
ability of legislators to deliver popular decisions is
affected by a number of important factors. The following
narrative addresses both supply and demand factors
affecting the provision of occupational licensing
legislation.
Legislators' response to demands for occupational
licensing legislation affects their popularity and,
'perhaps, their livelihood. In the case of occupational
licensing, legislators need to be concerned about three
groups: those who are regulated, those who regulate, and
those who are protected by regulation. Of the three,
68
legislators are least likely to be concerned about the
support of regulators. While regulators can affect the
performance of legislators to some degree (for example,
regulators can moderate the speed with which they attend to
constituent concerns), they do not control votes, which is
the primary currency of the elected official. For the
purposes of the legislative activity portion of this study,
it will be assumed that regulators insignificantly affect
the demand for occupational licensing legislation.
A number of theorists have hypothesized that members
of regulated professions produce important impacts on
legislation which regulates them (Moore, 1961; Feltzman,
1976; Feldstein, 1977). The professional members or their
organizations can affect voting behavior in two ways:
first, they can mobilize support or opposition within the
profession for particular legislators. Second, these
interests groups can contribute significant financial
support to politicians' campaigns. These two effects
encourage politicians to be responsive to demands by the
regulated profession.
The demand for protection by professions depends on
two factors: the degree of competitiveness between members
of the profession being regulated and the degree to which
the individual profession is organized. Researchers have
demonstrated that professions seek licensing regulation as
a method to reduce competitive influences (Moore, 1961;
69
Holen, 1965; Rayack, 1976; Leffler, 1978; White, 1979a).
Based on this evidence, professions in highly competitive
states (for example, states experiencing significant
immigration of professionals from other states) are most
likely to seek restrictive licensing practices.
If professions seek regulation as a means of
protection, they should actively oppose any reforms that
would conceivably introduce market instability or a
reduction in protection. Reforms that would give more
power to the public interest could be expected to engender
considerable opposition by professionals, but successful
opposition is dependent on the relative clout of the
relevant profession and consumers. A highly organized
profession is more likely to have the clout necessary to
counteract consumer pressures for relaxation of regulatory
restrictions, especially given the difficulties inherent in
mobilizing consumers with relatively lower marginal
interests in these issues.
The effectiveness of the profession's efforts to
influence licensing legislation depends upon how well they
mobilize resources. The notion of political clout in the
present environment means the ability to provide
significant contributions to campaigns. Associations which
represent small groups of individuals are less likely to
have adequate resources to make such donations.
The demand for consumer protection depends on, first,
70
the degree to which consumers require protection due to
their lack of sophistication and, second, the degree to
which they are organized and demand protection. Relatively
sophisticated populations are generally able to operate as
effective consumers in the marketplace and require less
protection from potentially harmful producers (Benham and
Benham, 1975). These consumers compare products on
dimensions of price and quality and make purchases
consistent with their values and interests. In other
words, these consumers have demonstrated a facility with
information since they know what data they need for
comparisons, how to acquire it, and how to use it once it
has been obtained. These consumers are less likely to need
or request regulatory protection and will prefer an
unfettered market.
Like professional groups, consumer associations that
can demonstrate that they represent large numbers of
affected individuals are likely to develop and maintain
credibility with legislators. Again, larger groups will be
better able to generate both human and financial resources
necessary to effectively influence legislative activity.
States which have included public members on licensing
boards may provide another avenue through which consumers
may demand licensing reform legislation. Public members of
occupational licensing boards represent consumers during
legislative deliberations. These members are likely to
71
influence the adoption of state legislative occupational
licensing policies in both the development of board
positions on legislative reforms and their public testimony
and private comments to legislators considering reforms.
Consumer perspectives on legislative reforms are more
likely to prevail if there is a greater proportion of
consumers to professional members. Further, the presence
of more consumer representatives assures that legislators
are more likely to be contacted and lobbied for consumer-
oriented legislative reforms.
The supply of occupational licensing legislative
activity depends on two factors. First, the homogeneity of
the population represented may affect how much consumer
protection legislation is adopted. The degree of
competition for legislative seats may also be important.
Smith (1982), using data regarding the number of
constituents per representative, has shown that electorate
homogeneity can affect the amount of licensing legislation
introduced in a state. Smith hypothesized two effects
which operated in the same direction. First, the more
constituents a representative serves, the less homogeneous
the constituency, which means the political costs for
offering special interest legislation should be low. That
is, heterogeneous populations will find it more difficult
to develop and disseminate information about problematic
legislative positions and 'to mobilize effective opposition.
72
Second, if the ratio of constituents to representatives is
large because of a relatively small number of
representatives, the political costs of enacting
legislation are likely to be low. Therefore, Smith
expected (and found) that states with high ratios of
constituents to representatives would generate more
licensing legislation in general.
The effect of this variable in the particular case of
consumer-oriented licensing reform may be different.
Smith's theory is based on the expectation that a diffusion
of interests allows the representative to support special
interests to the detriment of the general public interest.
If the licensing reforms that are included in this study
are primarily perceived by special interests (i.e., the
regulated professions) to support public rather than
private interests, the representative that supports special
interests will oppose the reforms. In other words, this
variable will have the opposite effect (i.e., negative) in
the case of reforms intended to reduce professional power,
thus states with higher ratios of constituents to
representatives are less likely to enact consumer-oriented
licensure reforms.
In states with a particularly competitive political
environment, candidates are encouraged to support
legislation that benefits particular interest groups in
order to obtain financial support and endorsement.
73
Legislators may be placed in a position in which they must
support either consumer- or producer-oriented occupational
licensing reform in order to generate the necessary support
for election.
Politicians in politically stable states may
experience little competition for re-election. In that
case, they may have the knowledge and experience necessary
to seek regulatory reform, but may not be motivated to
sponsor such legislation without significant evidence of
the need for reforms that is likely to alienate either
consumers or producers (or both).
Even though legislators in less politically stable
states may be less capable of dealing with some of the
issues implicit in occupational licensing due to their
inexperience, competitive forces may result in more
legislative activity. It is expected that politically
unstable states will generate more consumer-oriented
licensure reforms, since the instability may require
candidates to demonstrate their support for the electorate.
It should be noted that several legislative variables
that have been used in previous studies (i.e., party
competition and legislative professionalism) are not
included in this study. These variables have not been
included primarily because it was anticipated that they
would not significantly affect the policies which are
studied. Specifically, it was expected that the relative
74
power of political parties would be less important than the
degree to which legislative representatives turnover. The
party competition issue would be important if the
occupational licensing policies could be considered
ideological in nature. Legislative professionalism seems
less important than the other legislative issues because
legislators are likely to seek input from the occupations
being regulated and the licensing agencies themselves
regarding licensing policies rather than relying on
legislative staff to understand the complexities and
subtleties of these regulations.
In the legislative arena, several hypotheses can be
identified :
HYPOTHESIS 1 : An unsophisticated electorate demands more
occupational licensing restrictions than other types of
voters.
HYPOTHESIS 2: States which have professional groups that
represent large percentages of professional members will
enact more restrictive legislative licensing policies.
HYPOTHESIS 3: Politically unstable states will generate
less restrictive licensing legislation.
2. Licensing board policies
Licensing board policies are developed by the board
members and administrative staff members to respond to
75
consumer and professional interests. The extent to which
these boards adopt consumer-oriented policies depends on
several supply and demand factors. On the demand side,
these policies depend on the sophistication of consumers
and their desire for protection. On the supply side,
public board member experience and knowledge affects the
types of policies adopted, as does the type of staff
support provided the board.
The demand side arguments for consumer-oriented board
policies are similar to those that were made for the
adoption of consumer-oriented legislative policies. In
short, the licensing boards are likely to mirror state
characteristics on consumer issues. If the state reveals a
strong orientation toward consumer protection legislation,
licensing boards will share that perspective. If a clear
preference toward a competitive market has been revealed,
licensing boards will be prone to reinforce that notion.
The supply side arguments for the adoption of
consumer-oriented board policies involve degrees of
administrative staff support and consumer representation.
It is argued that licensing agencies with greater staff
expertise will support the development of consumer-oriented
policies. The basis for this argument is the hypothesis
that staffs with experience and training will better
understand economic principles of efficiency which
emphasize competition rather than regulatory initiatives
76
likely to protect the regulated (Berry, 1979). It is
further argued that centralized agencies are more likely to
have staffs with the necessary expertise to support these
policies, since centralized agencies appear to rely less on
patronage and more on civil service systems to acquire
staff members (Shimberg, 1982; Gross, 1984). The
administrative efficiencies implicit in centralization are
also likely to allow staff members to focus their efforts
on policy review and generation rather than on more mundane
administrative activities. Scale economies may allow
licensing agencies to devote resources to activities that
would build consumer capability, like information
dissemination and education.
Board member experience and sophistication with regard
to consumer issues can be expected to have a major impact
on board policies. First, boards without consumer
representation can not be expected to hold consumer
priorities high, since consumers have no standing in board
proceedings. Second, boards with low percentages of
consumer representatives are not likely to adopt consumer
perspectives as consumer members can be easily outvoted.
Third, consumer representatives will be less effective when
they are inexperienced. Gross (1984) notes that consumer
members have few incentives to maintain interest in
licensing board activities since effects on consumers may
be indirect, hard to identify, and confusing. Experienced
77
consumers (especially those who have some training in
politics, administration, or economics) are more likely to
recognize the interests at play and are better able to
maneuver between those interests to effect consumer-
oriented policies.
Several hypotheses regarding the adoption of consumer-
oriented policies by licensing boards can be abstracted
from this discussion:
HYPOTHESIS 4: Licensing boards in states with higher
percentages of public members on licensing boards will
adopt consumer-oriented policies.
HYPOTHESIS 5: Licensing boards in states with cêntralized
administrative structures will adopt consumer-oriented
policies.
HYPOTHESIS 6: Licensing boards in states with
sophisticated consumers will adopt consumer-oriented
policies•
Conclus ion
This chapter has defined the theories which explain
the impact of two reforms on legislative and licensing
board policies. Briefly, it is expected that states that
are politically unstable, have well organized professional
interest groups, have relatively unsophisticated consumers,
and little or no consumer representation will adopt
78
restrictive licensing legislation. Licensing boards in
states with consumer board representation, centralized
administrative structures, and sophisticated consumers will
adopt consumer-oriented policies. The next chapter details
the tests of these hypotheses, and the data and problems
associated with the tests.
79
Empirical Specification
This chapter specifies the data elements used to test
the theories developed in the previous chapter. The first
section describes the health occupations that will be used
to test the theories empirically and discusses the
implications of this choice. The second section specifies
the variables used in the legislative activity equations,
and discusses the sources and limitations of the data. The
third section provides similar details on the licensing
board activity equations.
Testing the Effects of Reforms on Health Occupations
This study evaluates the impacts of centralization and
board membership reform on the licensing of health care
professionals. There are several reasons why health care
professions were chosen for this study. First, other
researchers have investigated licensing effects in the
health care field, thus a reasonably large body of
knowledge exists. Second, it was expected that since
health care occupations were among the oldest regulated,
the administrative agencies would collect relevant data for
use in testing these propositions. Third, health care
professions have been selected because of the special
licensing problems they present. Health care occupations
require considerable training, are generally held in high
regard and status, and comprise a substantial part of local
80
and national economies. In short, health professionals
still enjoy a certain "mystique" which is likely to make it
difficult for regulatory staff and board members to avoid
capture by the particular professions. If these licensing
problems can be overcome for health care professions, the
solutions can likely be transferred to other, perhaps less
problematic, professions.
In the original formulation of this research, seven
health occupations were selected for study : medical
doctors (M.D.s), doctors of osteopathy (D.O.s), doctors of
chiropractic medicine (D.C.s), registered nurses (R.N.s),
physician's assistants (P.A.s), nurse practitioners
(N.P.s), and certified nurse midwives (C.N.M.s). These
occupations were chosen because they represented primary
care providers ; most consumers have their first contact
with the medical field through one of these types of
professionals. Of particular concern was the anticipated
interaction between two groups. One group, M.D.s and
D.O.s, could be considered the traditional primary care
providers, while the rest of the professions have
increasingly been considered primary care substitutes. As
noted in chapter two, consumers can obtain substantial
benefits through the use of such substitutes and it was
hoped that this study would be able to determine whether
legislative and licensing board policies have encouraged
the proliferation of these professions. Unfortunately,
81
most of the licensing boards responsible for these
professions were unable to provide historical data with
which valid comparisons could be made.^ (Of course, this
fact alone may indicate a low level of encouragement for
these alternative professions.) Due to this data
limitation, this study will be limited to medical and
osteopathic physicians, chiropractors, and registered
nurses.
Tests of Legislative Reform Theories
Occupational licensing attempts to assure the
competence of regulated professionals during the entire
span of time that the individual practices. Two distinctly
^A survey of all state agencies responsible for
licensing the original seven occupations was conducted in
1986 and 1987. Data for the time period 1975-1984 were
requested (see Appendix 1 for a copy of the questionnaire).
The response rate for the various professions to the 1987
survey are as follows :
Profession States regulated States responding
Medical Doctor (M.D.)
jOsteopath (D.O.)
jRegistered Nurse (R.N.)
^Chiropractor (D.C.)
Physicians' Assistants (P.A.)
Nurse Midwives (C.N.M.)
Nurse Practitioners (N.P.)
50 25
50 22
50 37
50 20
45 8
43 1 1
46 12
82
different problems are presented by the comprehensive
nature of this enterprise. First, competence must be
assured at entry. Second, after a professional has been
licensed for practice, competence must be monitored. The
tests of the reform theories, as they relate to legislative
initiatives, will center on each of these problems. The
test of entry level competence reforms will address the
restrictiveness of entry requirements. The test of
continuing competence will be directed at the imposition of
mandatory continuing education by legislators.
1 . Entry restrictions
State legislatures seek to restrict the entry of
practitioners to only those who have demonstrated
competence in the field. In order to accomplish this
winnowing process, occupational licensing agencies are
empowered by the state legislatures to screen applicants
through the use of competency tests, educational
qualifications, apprenticeship requirements, and in some
cases, morality tests and citizenship requirements.
Several indicators could be used to test the extent to
which entry restrictions are sensitive to policy
preferences of legislators. If the theories previously
articulated are correct, consumers will seek to maintain
quality, but will want to make the regulatory process more
efficient by eliminating restrictions which would only
83
benefit producers (e.g., those that can be expected to
result in price increases without quality increases). Some
of the measures that could be used to test the
restrictiveness of the legislatively adopted entry barriers
include: the existence of age, citizenship/residency, and
morality requirements, and restrictions on out-of-state
applicants.
One group of indicators of legislative preferences
regarding entry restrictions could be the existence of
residency or citizenship requirements, age minimums, and/or
morality restrictions. As has been noted in previous
chapters, such requirements have little relation to
professional practice and are probably sought by existing
practitioners as a means of controlling supply and
restricting competition.
A final indicator that could be used to test the
effect of public members on entry barriers is the states *
policies toward reciprocity and endorsement. Reciprocity
refers to a policy in which the state only accepts the
qualifications of out-of-state applicants when there is an
agreement with the originating state. If the originating
state has not agreed to accept the other state's
applicants, the receiving state will not accept the
originating state's applicants. Endorsement refers to the
practice of reviewing an applicant's qualifications without
regard to the state of origin (i.e., if the applicant is
84
licensed in another state, that license is "endorsed" by
the state in which an application is filed). Public
members who are concerned about protecting the public
should be most concerned about applicants' qualifications,
not the existence of a legal agreement regarding
reciprocity. Consumer members should also be concerned
that the state legislature requires boards to enforce an
explicit policy in order to assure fairness in evaluating
licensing applications. The absence of such a policy can
be considered equivalent to requiring reciprocal agreements
since there is no protection from arbitrary decisions that
restrict consumer choices.
It is assumed that legislative preferences for
restrictive entry policies are a linear function of
institutional, social, and political characteristics. The
legislatures' preferences can be denoted as Z and the
characteristics as C. Thus, the model is:
Z = a C + u
where d is the vector of coefficients associated with C
and u is a random error term.
Z cannot be observed, but it is possible to observe
the choice based on Z. State legislatures can choose to
eliminate unnecessary restrictions, or adopt one or more of
these restrictions. This choice can be reflected as a
continuum from no restrictions to adoption of all
restrictions. It is reasonable to assign equivalent values
85
to the four restriction categories (age, morality,
residency/citizenship, and reciprocity) since each
characteristic alone is sufficient to disallow licensing
for the applicant.
There is some critical value of Z, denoted Z*, above
which a legislature chooses to adopt one of the restrictive
practices. There is a higher value of Z which can be
called Z**, that denotes the adoption of two of the
restrictive practices. Z*** denotes the adoption of three
of the restrictive practices, and Z**** denotes the use of
four restrictions. If we denote the observed choice as R,
where R is an ordered multiple categorical variable, then
the relationship between Z and R can be specified as:
R = 0 if Z < Z*
R = 1 if Z* < Z < Z**
R = 2 if Z** < Z < Z***
R = 3 if Z*** < Z < Z****
R = 4 if Z > Z****
Therefore, the model to be estimated is:
R = 3 C + e
where 3 is the vector of coefficients associated with C
and e is the error term, assumed to be distributed
logistically.
Nine independent variables are expected to explain
variations in the restrictiveness of licensing entry
barriers : the number of regulated professionals per
86
thousand population, the political clout of professional
associations, education level, urbanization level, the
availability of information, the proportion of public
members on the licensing board, the number of constituents
per legislative representative, turnover in legislative
membership, and legislative predilection toward consumer
protection legislation. Table 4.1 summarizes all the
independent variables and relates them to the theories
postulated in the previous chapter.
The demand variable which reflects professional
competitiveness is the number of professionals per thousand
state residents (COMP). Ideally, some measure of
professional income would be used to demonstrate
competitiveness, however, those data are unavailable over
the time period studied. The ratio of professionals to
population is a reasonable proxy because it indicates the
extent to which the growth of the profession is encouraged
in the state. A positive coefficient is expected since
highly competitive professions are likely to seek
protection. Data for this variable are provided by the
respective professional associations on an annual basis.
The organizational capabilities of the relevant
professional associations are measured by the percentage of
state professionals belonging to the state association
(CLOUT). Again, it would be preferable to use a measure
such as total contributions to state legislative candidates
87
by political action committees representing professional
associations. Those data suffer from extreme variation
(states may have substantially different reporting
requirements) and unavailability (states may not require
public disclosure of these data). Unfortunately, only the
American Nurses Association regularly discloses state
association membership figures. Therefore ^ this variable
will only be used in the test of the nursing profession.
It is expected that the greater the professional clout, the
more restrictive the state licensing law.
Consumer sophistication is measured with three
variables: education (ED), urbanization (URB),
and information availability (INFO). It is anticipated
that all three consumer sophistication variables will have
negative coefficients. As indicated in the theory chapter,
sophisticated and well-educated consumers prefer unfettered
markets because they are best able to match their tastes
with the available products. Therefore, it is expected
that states with more highly educated consumers will adopt
less restrictive licensing policies. This variable is
defined as the percentage of the population 25 years of age
or older with 12 or more years of education. These data
are available from the 1980 U.S. census.
Urbanization implies more opportunities for
interpersonal contact, which lowers search costs and (by
implication) indicates greater interest in consumer
88
Table 4.1
Variables for Tests of Legislative Equations
Demand variables
Professional competitiveness
--professionals per thousand population (COMP)
Professional organization
--association membership (CLOUT)
Consumer sophistication/demand
--education level (ED)
--urbanization (URB)
--information availability (INFO)
--disciplinary actions (DISC)
Consumer organization
--public membership on licensing boards (PUB)
Supply variables
Homogeneity of population
--constituents/representative (NR)
Political competition
--legislative turnover (TURN)
--consumer protection legislation (C)
89
information (Benham and Benham, 1975; Meier, 1987). This
tendency, coupled with increased ability to mobilize for
political action, makes urban consumers less likely to
depend on regulation as a means of controlling inadequate
producers and more vocal about the need for reform when
regulation is required. This variable, the proportion of
the state's population residing in urban settings, will be
denoted as URB in the following equations. Data for this
variable are available through the U.S. Census Bureau on an
annual basis.
The availability of information (INFO) will be
measured by the percentage of the state's population
subscribing to daily newspapers. Newspapers provide a
considerable amount of data, and the fact that they are
available daily and in a form that can be stored and
reviewed make them even more valuable as a consumer
information media. Data regarding state daily newspaper
circulation are annually published in the IMS Directory of
Publications.
The percentage of total licensing board membership
composed of public members is used to denote the extent to
which consumers are organized. The higher the percentage
of public members on licensing boards, the less restrictive
legislative licensing policies are likely to be.
Longitudinal data for this variable have been collected
from the state licensing agencies in the 1987 survey. This
90
variable will be lagged two years throughout this study
because it is expected that public members will require at
least that much time to become familiar with board policies
and procedures. Once they have gained that experience,
consumers will be more effective and assertive in
forwarding their views.
On the supply side, one variable is expected to
reflect the degree of population homogeneity in the state:
the number of constituents per representative (NR)• It is
anticipated that the higher the NR ratio, the more
restrictive the licensing laws are likely to be.
Information for this variable is available in the Book of
the States, prepared by the Council of State Governments.
The NR ratio can be calculated from biennial information
provided by the Council.
The political competitiveness of the states will be
reflected in two variables: legislative turnover (TURN)
and the legislatures' predilection toward consumer
protection legislation (C). The legislative turnover
variable is defined as the percentage of seats in the state
legislature that changes during each election. It is
expected that states with higher turnover rates will adopt
less restrictive licensing laws. Data for this variable
are also available on a biennial basis from the Book of the
States.
The third supply variable likely to affect legislative
91
interest in licensing reform could be termed the
legislature's predilection toward consumer reform (C).
This variable would establish whether there has been a
general trend toward consumer-oriented legislation. Since
the two structural licensure reforms studied are expected
to shift the balance of licensure toward consumers, it is
reasonable to expect the elimination of unnecessary
restrictions in states inclined to legislatively protect
consumers legislatively. A negative sign on the
coefficient is anticipated.
Data for this variable are also obtained in the Book
of the States. Volumes 21, 23, and 24, include tables
which indicate whether the state has adopted legislation
regarding 17 different consumer protection issues. Data
for this variable consist of the total number of issues in
which the state has approved legislation; states with a
strong predilection toward consumer protection could
potentially adopt all 17 measures.
In summary, the model of state legislative choice for
occupational licensing restrictions, with the expected sign
of each coefficient denoted in parentheses, can be stated
as :
Equation 1
R = [PUB_2 (-), TURN (-), NR (+), C (-), ED (-),
URB (-), INFO (-), CLOUT (+), COMP (+)]
The model is estimated using an ordered, multinomial logit
92
analysis on three professions across 50 states.
2. Continuing competence
The second area of concern in quality control in
professional licensing is the maintenance of skill levels.
Many states have attempted to ensure that practitioners
maintain up-to-date skill levels through the use of
mandatory continuing education. This process requires the
professional to participate in a prescribed number of hours
of new coursework each year (the amount of coursework
required varies by state). Even though there has been
little research which validates the effect of such
coursework on individual practice, some of the states
depend on this effort to maintain professional skills and
protect consumers.
Some professional associations (the American Medical
Association, most notably) have resisted mandatory
continuing education, arguing that the professional should
be able to choose the most appropriate method for skill
maintenance. Such concerns notwithstanding, it seems that
consumers should be interested in assuring that
practitioners maintain current skills and that
responsibility for monitoring professional performance in
this area is rightly placed in licensing agencies. Of
course, consumers would probably be better assured of the
skills of their professionals through a system of periodic
93
tests, but licensees have rigorously opposed such notions
in the past.
Research on continuing education has tested the extent
to which participants may be satisfied with the learning
experience, or the magnitude of skill transfer to actual
working environments, but there has been little effort to
determine the political determinants of this regulatory
requirement. Begun, Crowe, and Feldman (1981) used the
presence of a continuing education requirement as one
element of an index measuring the degree of state
regulation of optometry, but individual effects were not
specified because of strong correlations with the other
three measures.
Again, it is assumed that the state legislature's
preferences regarding mandatory continuing education are a
linear function of institutional, political, and social
characteristics. Since the dependent variable in this
equation is categorical, a choice model similar to equation
1 will be used. In this case, each legislature can either
choose to adopt a continuing education requirement or not.
Therefore, the model to be estimated uses a dichotomous
ordered categorical dependent variable (E) and the error
term is assumed to be distributed logistically.
Nine variables are expected to explain state
legislatures' interest in regulating continuing education
for licensees. The variables are the same as in equation
94
1, except for the absence of the professional
competitiveness variable and the addition of a variable
denoting disciplinary actions taken against licensees
(DISC). The competitiveness variable was used in equation
1 to explain moderation in supply, which should not apply
in equation 2 since mandatory continuing education should
not be affected by supply variations. Increases in
disciplinary actions can be used to argue that regulated
professionals are not adequately maintaining their skills
and thus require quality monitoring.
Disciplinary actions per thousand professionals is
used as a demand variable in this equation. It is expected
that consumers may demand legislative adoption of
continuing education requirements as a result of increases
in this variable since it may denote potential quality
problems. The coefficient of this variable is expected to
be positive. Data regarding this variable have been
collected from state licensing agencies for all occupations
studied in the 1987 state survey. The Federation of State
Medical Boards (FSMB) has developed a national
clearinghouse for physician disciplinary data and has
released data for 1984 and 1985.
To summarize, the model of state legislative choice
for mandatory continuing education, with the expected sign
of each coefficient denoted in parentheses, is:
95
Equation 2
E = [PUB_2 (+), TURN (+), NR (-), C (+), ED (+)
URB (+), INFO (+), CLOUT (-), DISC (+)]
The model is estimated using an ordered, multinomial logit
analysis, on three professions across 50 states.
In summary, it is expected that state legislatures
will prefer consumer-oriented licensing reforms if they
have higher turnover rates, low ratios of constituents to
representatives, a predilection toward consumer protection
legislation, a higher education level, greater consumer
interest in information, and are more urbanized.
Legislatures in states in which professional associations
are better organized are less likely to adopt consumer-
oriented reforms. The next section of this chapter
discusses the anticipated effects of reforms on licensing
board policies.
Licensing Board Effects
The balance of interests by licensing boards is
reflected in their policies related to information
dissemination and enforcement of professional enforcement.
These two areas have been selected for analysis because
they represent some of the most salient issues for
consumers. It is highly likely that consumers only contact
licensing boards because of quality of care concerns.
Either these concerns are based on the consumer's
96
perception that the care received has been inadequate or
incompetent in some manner or the consumer seeks
information about the provider prior to obtaining service.
At either point, licensing boards best serve the consumer
by offering information, facilitating the complaint
process, and assuring that incompetent practitioners are
disciplined. Facilitation of the complaint process could
take many forms, but at the most elementary level, the
agency can provide the consumer with information about the
complaint process and about professionals against whom
previous actions have been taken.
1 . Information dissemination
In the past, licensing boards have been involved in
public information issues, but they have usually attempted
to impede rather than facilitate the flow to consumers
(Benham, 1972; Benham and Benham, 1975; Feldman and Begun,
1978). In some cases, licensing boards have adopted
policies outlawing the publication of prices, advertising,
or posting of messages to consumers regarding less costly
substitutes such as generic drugs (Rayack, 1976). Clearly,
these boards were not interested in encouraging competitive
practices.
Several indicators of board policies on information
dissemination can be used. First, board restrictions on
the use of advertising is an obvious indicator. This issue
97
has become moot since the Supreme Court ruled that
advertising restrictions constituted restraint of trade
under the Sherman Act. The second potential indicator, the
dissemination of advertising guidelines for licensees,
suffers from the same problem since most state attorneys
general have considered such guidelines restrictive. A
third potential indicator could be the extent to which
licensing boards disseminate information about licensee
prices and quality. This indicator is not used because
there have been few such efforts in any state, and none of
these efforts have been generated by licensing boards.
The fourth potential indicator seems to be the most
useful and likely to be used by licensing boards :
publication of disciplinary actions. This indicator would
be useful from a consumer perspective because it would
serve as a warning of incompetence. It is likely that
boards that are concerned about protection of the public
would use such warnings. Further, licensing agencies can
choose to disseminate this information at several levels :
through agency newsletters, news conferences, press
releases, paid classified advertisements, and/or notices to
potential employers (such as hospitals) and other
regulatory agencies. From a public interest perspective,
it would be most helpful for boards to notify as many of
these sources as possible.
This dependent variable has not been tested previously
98
in the literature. Host health care information research
has focused on the imposition of advertising restrictions
on optometry (Benham, 1972; Benham and Benham, 1975;
Feldman and Begun, 1978) and prescription drugs (Leffler,
1981) by the respective licensing boards.
Licensing board preferences regarding the notification
of consumers and other providers about disciplined
professionals are assumed to be a linear function of
institutional, political, and social characteristics. Six
variables are expected to reflect these characteristics and
to predict the extent to which licensing boards notify
organizations and consumers of disciplinary actions taken
against individual practitioners (see Table 4.2).
The demand variables have been discussed in the
previous section detailing the legislative equations. The
conceptual support for state education level (ED),
information availability (INFO), urbanization (URB), and
predilection toward consumer protection (C), is consistent
with the arguments offered in that section. Professional
competitiveness (COMP) has not been included as an
independent variable because it is not expected to affect
the adoption of licensing board policies.
Three supply variables are expected to influence
licensing board adoption of consumer-oriented policies :
public membership on licensing boards, the presence of
sunset review requirements, and the relative centralization
99
of the licensing board administrative structure.
A higher percentage of public members on licensing
boards (PUB) is likely to result in greater information
dissemination because of their sensitivity to consumer
information needs. This effect may be moderated by
difficulties in maintaining experienced consumers on the
boards (Shimberg, 1982), however data regarding this
variable are not available. Information regarding the
membership variable has been obtained through the
Clearinghouse on Licensure, Enforcement, and Regulation
(CLEAR) and the 1987 survey of state licensing agencies.
States which centralize the licensing function (CENT)
are both more capable and more interested in disseminating
information. Increased capability is due to increased
resources and specialization, since these agencies are more
likely to have information specialists. These licensing
agencies are likely to be more interested in information
dissemination because of the presence of information
specialists who can communicate the need for such
activities to board and staff members.
For the purposes of this study, centralization will be
measured on three dimensions. The first dimension is the
issuance of licenses, next is the approval of education
standards for entry, and finally, the development of rules
and regulations governing the licensing process. This
combination includes administrative and policy-making
100
Table 4.2
Variables for Tests of Licensing Board Equations
Demand variables
Consumer sophistication
--education level (ED)
--information availability (INFO)
--urbanization (URB)
Consumer demand
--consumer protection legislation (C)
Supply variables
Consumer representation
--public membership on licensing boards (PUB)
--sunset review (SUNSET)
Staff support
--centralization (CENT)
101
aspects of licensing board responsibility which should
provide a useful measure of the degree of centralization.
Boards independently responsible for these three functions
are considered decentralized, while boards with no
responsibility in these areas, or which are purely
advisory, are considered centralized. Any combination of
one or two centralized functions are considered partially
centralized boards.2
Information about changes in these organizational
dimensions were obtained through a survey of relevant state
licensing agencies and through the Clearinghouse on
Licensing, Enforcement, and Regulation (CLEAR). Like the
public membership variable, centralization will be lagged
two years to reflect the transition time necessary for an
organization to react to such a change and develop new
policy approaches.
Equation 3 is the specification of the model which
explains this element of the information dissemination
activities of licensing boards :
^Roederer and Shimberg (1980) used some fourteen
functions through which they developed a five point scale
of centralization, however the scale was not used to
identify or predict agency activities or policies. The
scale was not used in this research because of the
difficulty in obtaining current and historical data and
because it was thought that the finer distinction was
unnecessary in this research.
102
Equation 3
N = [PUB_2 (+), C (+), ED (+), INFO (+) CENT_2 (+)]
Equation 3 can be estimated using ordinary least squares.
2. Enforcement actions
The second area in which the balance of interests may
have shifted as a result of structural reforms involves the
quality monitoring process. This process is intended to
protect the public from incompetent practitioners who slip
through the initial screening mechanism of licensing.
One of the manifestations of an active quality
monitoring process is the number of disciplinary actions
initiated by the licensing agency each year against
licensed professionals. These actions can be triggered by
complaints from consumers, other professionals, or practice
irregularities noted by licensing agency staff. In some
states, these investigations can also be initiated through
malpractice suits or reports by other regulatory agencies.
Researchers over the last several decades have noted
the low level of disciplinary actions taken by licensing
boards even though other indicators of incompetence have
increased dramatically (Derbyshire, 1969; Wolfe, Bergman,
and Silver, 1985; Kusserow, Handley, and Yessian, 1987).
These researchers attribute the flatness of the curve to
such issues as the difficulty of defining incompetence,
unwillingness of other professionals to testify about an
103
incompetent colleague, and increasingly costly due process
requirements.
Disciplinary actions have rarely been used by
researchers investigating occupational licensure. Even
those investigators with particular interests in the
quality of services provided by licensees have only touched
on this measure. Carroll and Gaston (1981) used this
measure to strengthen other findings that restricted entry
functions as a quality control device. However, the
disciplinary data were limited to one profession
(attorneys) and consisted of five year averages of
disciplinary actions which restricted the researchers to a
narrow cross-sectional analysis.
The only instance in which disciplinary actions are
used in the health care field does not attempt to determine
causal relationships. Instead, Wolfe, Bergman, and Silver
(1985) illustrate the disparity between physician
disciplinary actions and various estimates of professional
malpractice. The disparities are simply used to encourage
policy makers and licensing boards to reform the
disciplinary process to provide better consumer protection.
There is a potentially important conceptual problem
associated with the use of this indicator. It is assumed
that there is an inverse relationship between the number of
disciplinary actions and the rigor of the quality
monitoring program. It is conceivable that a rigorous
104
quality monitoring program would generate few, if any,
disciplinary actions since the entry restrictions and
continuing competence programs would successfully screen
the incompetent or identify the marginally competent and
divert them to training programs. However, since
researchers have consistently commented on the disparity
between projections of the number of incompetent
practitioners and the number of disciplinary actions it
seems safe to assume that active quality monitoring
programs will generate proportionately more disciplinary
actions.
Board preferences regarding an active quality
monitoring program are affected by institutional,
political, and social factors and can be expressed as a
linear function. Five variables are expected to predict
the number of disciplinary actions generated by state
licensing boards : the percentage of public members on
licensing boards (PUB), whether or not the board is subject
to sunset review (SUNSET), centralization (CENT), political
clout (CLOUT), and urbanization (URB).
It is expected that the number of disciplinary actions
initiated by licensing agencies each year will be
positively affected by higher percentages of public members
on the licensing boards. Public members should be
interested in an aggressive quality monitoring program in
order to protect the public. Similarly, more highly
105
centralized licensing agencies should generate more
disciplinary actions per thousand licensees than
decentralized agencies. Centralization should contribute
to an aggressive disciplinary program through increased
expertise and administrative innovations such as
computerized data systems.
Sunset review legislation may have an important effect
on the performance of the regulatory agencies. This
legislation "sunsets" (eliminates) regulatory agencies that
have not been shown to be necessary. Sunset review
research has focused on the extent to which this reform has
resulted in substantive changes in licensing agencies.
Martin (1979) highlights the number of agencies that have
been eliminated, while Roederer and Palmer (1981) and
Slaughter (1986) emphasize procedural revisions in agency
operations. Supporters of sunset review expect that
administrative changes in licensing will produce greater
efficiency and effectiveness, although none of the studies
have attempted to quantify these concepts. Other licensing
research does not incorporate this dynamic into the
analysis.
Since sunset review can potentially eliminate
unnecessary regulatory agencies, there is a powerful
incentive for agency staff and board members who are
interested in maintaining the agency to prove their
aggressiveness in protecting the public. Therefore,
106
agencies in states with sunset legislation (SUNSET) should
be more vigorous in their enforcement of disciplinary
actions.
Professional clout has been included as an independent
variable in this equation because it is expected that well-
organized professional groups will attempt to exert
pressure on licensing boards to minimize disciplinary
actions. These organizations may consider their own
internal disciplinary procedures superior to that conducted
by state agencies, or may wish to encourage informal
disciplinary approaches in order to maintain professional
control of the process.
The model of board choice regarding disciplinary
actions, with the expected sign of each coefficient denoted
in parentheses, is :
Equation 4
DISC = [PUB_2 (+), SUNSET (+), CENT_2 (+),
CLOUT (-), URB (+)]
The equation can be estimated using ordinary least squares.
Conclusion
This chapter has identified specific methods by which
the theories of Chapter Three may be tested. The
independent and dependent variables to be used in the tests
have been specified and the data sources for these
variables have been enumerated. The next chapter analyzes
107
the estimations of these equations:
Equation 1
R = [PUB_2 (-), TURN (-), NR (+), C (-), ED (-),
URB (-), INFO (-), CLOUT (+), COMP (+)]
Equation 2
E = [PUB_2 (+), TURN (+), NR (-), C (+), ED (+),
URB (+), INFO (+), CLOUT (-), DISC (+)]
Equation 3
N = [PUB.2 (+). C (+), ED (+), INFO (+), CENT_2 (+)]
Equation 4
DISC = [PUB_2 (+), SUNSET (+), CENT.2 (+),
CLOUT (-), URB (+)]
108
Table 4.3
Variable Specification and Sources
Variable
Equation 1
R
PUB
TURN
NR
ED
URB
Variable Specification
Licensing restrictions:
--residency/citizenship (1984)
--age minimums (1984)
--morality restrictions (1984)
--endorsement/reciprocity (1984)
--endorsement/reciprocity
(1975-1984)
Public membership
--percentage of total licensing
board composed of public members
(1975-1984)
Legislative turnover
--percentage of legislators
replaced in each election
(even years, 1974-1984)
Constituents per representative
--number of constituents per
state House and Senate
representative
(odd years, 1975-1985)
State predilection toward
consumer protection legislation
--number of consumer protection
acts adopted by legislature
(1975, 1979, 1981)
Sources
CLEAR, 1986
Survey, 1987
Survey, 1987
Book of the
States
Book of the
States
Book of the
States
Education level U.S. Census
--percentage of state population Bureau
with 12+ years of education
(1980)
Urbanization
--percentage of the state
population residing in
urban areas
(1975, 1976, 1977, 1978,
1980, 1983, 1984)
Statistical
Abstract of
the U.S. and
U.S. Census
Bureau
109
Table 4.3 (continued)
Variable Variable Specification Source
INFO Availability of consumer IMS Directory
information
--daily newspaper circulation
per thousand population
(1975-1985)
of
Publications
CLOUT Clout of profession association
--percentage of occupational
members belonging to
professional association
(1975, 1976, 1978, 1979,
1980, 1981, 1982, 1983,
1984, 1985)
ANA
COMP Competitiveness of profession
--professionals/1000 population
(1975-1984)
Survey, 1987
Equation 2
E Continuing education requirement
--presence or absence of
continuing education requirement
(1975-1984)
Survey, 1987
--presence or absence of
continuing education requirement
(1984)
CLEAR, 1986
DISC Disciplinary actions
--total disciplinary actions
per thousand licensees
(1975-1984)
--total disciplinary actions
per thousand licensees (M.D.s)
(1984, 1985)
Survey, 1987
FSMB, 1986a
FSMB, 1986b
Equation 3
N Information dissemination by
licensing boards
--number of organizations
notified of disciplinary actions
FSMB, 1986a
--distribution of brochures
to consumers
(1975-1984)
Survey, 1987
110
Table 4.3 (continued)
Variable Variable Specification
CENT Centralization
--extent of administrative
centralization
(1975-1984)
--extent of administrative
centralization
(1984)
Source
Survey, 1987
CLEAR, 1986
Equation 4
SUNSET Sunset review
--presence of sunset review
(1975-1984)
Survey, 1987
Abbreviations :
CLEAR = Clearinghouse for Licensure, Enforcement, and
Regulation, Council of State Governments
ANA = American Nurses Association
FSMB = Federation of State Medical Boards
111
Results
This chapter reports the results of the equations
regarding occupational licensing agency board membership
and centralization reforms which were specified in the
previous chapter. The chapter is organized around the four
equations which summarize the hypothesized relationships.
A final summary section draws together the various findings
and illuminates general patterns among the equations. The
supply/demand framework introduced in the empirical
specification chapter is used throughout this discussion to
provide a context for the findings.
In a number of cases, data limitations have restricted
the ability to produce useful estimations. Most notably,
low response rates on disciplinary data items have limited
the discussion regarding equation four. In addition,
virtually no profession responded in sufficient numbers to
the survey instrument to allow cross-sectional analysis
specific to the individual profession. In the discussion
that follows, any cross-sectional analysis limited to an
individual profession has been estimated from published
data.
While the response rate was less than optimal, the
distribution of the responses seems satisfactory. Maps 5.1
through 5.5 provide a graphic representation of that
distribution for survey data. Map 5.1 demonstrates the
112
coverage of the pooled responses and provides evidence that
most regions and types of states were amply represented in
this analysis. Subsequent maps show the coverage for
individual occupations.
Maps 5.6 through 5.9 depict the responses for the
pooled time series analyses. It appears that the physician
(M.D.) analysis over-represented the West, and perhaps, the
South. Northeastern, metropolitan states appeared to be
under-represented. The response for the nursing (R.N.)
analyses does not appear to over-represent any particular
type of state or region.
It should also be noted that the licensing agencies
which responded to the survey request were frequently
unable to provide historical data for the full period
studied (1975-1984). A number of respondents were only
able to provide data from the most recent two, three, or
four year interval. This further restricted the cross-
sectional analysis and explains why several of the tables
which follow are restricted to the post-1980 time period.
The limited response rates also affected the
analytical choices available for this research. As noted
previously, several of the equations to be tested included
categorical dependent variables which would normally
require logistic estimation procedures (Pindyck and
Rubinfeld, 1981). However, such procedures require
relatively high degrees of freedom in order to estimate the
113
model. With the exception of several of the equations in
which occupations have been pooled to increase the
observations and thus permit logistic analysis, estimations
have generally been limited to ordinary least squares.
Descriptive statistics are provided in Tables 5.1
through 5.5 for data used in the estimations. These tables
show the low response rate for several variables (e.g.,
disciplinary actions) and for individual occupations (e.g.,
osteopaths). These tables illuminate some important
differences between the occupations that are further
reinforced in the estimations. For example, it appears
that chiropractors are required to participate in
continuing education efforts, while physicians (both M.D.
and D.O.) and nurses are not. On the other hand,
physicians and nurses seem to enjoy considerable mobility
since a large percentage of their state legislatures and
boards have adopted endorsement policies, but these
policymakers have not extended similar privileges to the
chiropractic profession. Only nursing boards have embraced
the distribution of consumer brochures, but their
enthusiasm has been largely limited to recent years.
All four professions appear to operate consistently
with regard to the two independent variables of primary
interest. The percentage of public members on each
occupational licensing board, has increased over the time
period studied, with the high point occurring in 1984
114
Table 5.1
Descriptive Statistics
Selected Variables, 1987 Survey : M.D.a
Variable n
1 975
mean s.d. n
1978
mean s.d.
PUB
(% public mbrs) 20 .069 .119 21 .112 .116
CENTt»
--decentralized
--partially cent,
--centralized
19
89.5
5.3
5.3
19
89.5
5.3
5.3
DIS 1 2.177 3 7.673 9.259
endorsement^
--no endorsement
--endorsement
25
48.0
52.0
25
44.0
56.0
cont inuing ed.^
--not required
--required
25
84.0
16.0
25
80.0
20.0
brochures^
--not distributed
--distributed
18
94.4
5.6
18
94.4
5.6
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for these variables reports only the relative
frequency of the respective responses.
115
Table 5.1 (continued)
Descriptive Statistics
Selected Variables, 1987 Survey : M.D.a
Variable n
1981
mean s.d. n
1984
mean s.d.
PUB
(% public mbrs) 22 .141 .107 22 .152 .097
CENXt> . 19
--decentralized
--partially cent,
--centralized
89.5
5.3
5.3
19
84.2
10.5
5.3
DIS 6 7.027 8.207 8 7.608 10.635
endorsement^ 25
--no endorsement
--endorsement
44.0
56 .0
25
44.0
56.0
continuing ed.b 25
--not required
--required
80.0
20.0
25
76.0
24.0
brochures^ 18
--not distributed
--distributed
94.4
5.6
18
72.2
27.8
a. These data are used in
Tables 5.7, 5.8, 5.9 and 5.
the survey conducted by the
statistics for intervening
author.
the estimations reported in
11. The source of these data is
author in 1987. Descriptive
years are available from the
b. "Means" for these variables reports only the relative
frequency of the respective responses.
116
Table 5.2
Descriptive Statistics
Selected Variables, 1987 Survey: D.O.^
endorsement^ 12
--no endorsement
--endorsement
continuing ed.b 12
--not required
--required
brochures^ 3
--not distributed
--distributed
1975
mean Variable n __
PUB
(% public mbrs) 6 0.0
CENTb 5
--decentralized 80.0
--partially cent. 20.0
--centralized 0.0
DIS 0
83.3
16.7
75.0
25.0
100.0
0.0
s.d.
0.0
1978
n mean s.d.
0
12
12
.062
80.0
20.0
0.0
75.0
25.0
75.0
25.0
100.0
0.0
.104
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for these variables reports only the relative
frequency of the respective responses.
117
Table 5.2 (continued)
Descriptive Statistics
Selected Variables, 1987 Survey: D.O.a
Variable n
1981
mean s.d. n
1984
mean s.d.
PUB
(% public mbrs) 6 .086 .103 7 .1 70 .098
CENTb
--decentralized
--partially cent,
--centralized
5 5
80.0
20.0
0.0
80.0
20.0
0.0
DIS 0 1 .084
endorsement^
--no endorsement
--endorsement
12 12
75.0
25.0
75.0
25.0
continuing ed.b
--not required
--required
12 12
66.7
33.3
66.7
33.3
brochures^
--not distributed
--distributed
3 3
100.0 100.0
0.0 0.0
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for these variables reports only the relative
frequency of the respective responses.
1 1 8
Table 5.3
Descriptive Statistics
Selected Variables, 1987 Survey : D.C.a
Variable n
1975
mean s.d. n
1978
mean s.d.
PUB
(% public mbrs) 15 .057 .120 16 .076 .119
CENT^
--decentralized
--partially cent,
--centralized
16
87.5
12.5
0.0
16
87.5
12.5
0.0
DIS 1 6.872 — — 2 2.610 3.692
endorsement^
--no endorsement
--endorsement
20
80.0
20.0
20
80.0
20.0
continuing ed.b
--not required
--required
20
45.0
55.0
20
45.0
55.0
brochures^
--not distributed
--distributed
15
100.0
0.0
16
100.0
0.0
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for these variables reports only the relative
frequency of the respective responses.
119
Table 5.3 (continued)
Descriptive Statistics
Selected Variables, 1987 Survey : D.C.a
Variable n
1 981
mean s.d. n
1984
mean s.d.
PUB
(% public mbrs) 16 .152 .116 16 .186 .104
CENTb
--decentralized
--partially cent,
--centralized
16
87.5
12.5
0.0
16
81 .3
18.8
0.0
DIS 6 6.297 9.479 6 2.441 2.1 74
endorsement^
--no endorsement
--endorsement
20
80.0
20.0
20
75.0
25.0
continuing ed.b
--not required
--required
20
35.0
65.0
20
30.0
70.0
brochures^
--not distributed
--distributed
16
100.0
0.0
16
93.8
6.3
a. These data are used in
Tables 5.7, 5.8, 5.9 and 5.
the survey conducted by the
statistics for intervening
author.
the estimations reported in
11 . The source of these data is
author in 1987. Descriptive
years are available from the
b. "Means" for these variables reports only the relative
frequency of the respective responses.
120
Table 5.4
Descriptive Statistics
Selected Variables, 1987 Survey : R.N.a
Variable n
1975
mean s.d. n
1978
mean s.d.
PUB
(% public mbrs) 31 .041 .082 34 .086 .109
CENTb
--decentralized
--partially cent,
--centralized
34
79.4
17.6
2.9
34
79.4
17.6
2.9
DIS 3 .258 .262 8 .584 .384
endorsement^
--no endorsement
--endorsement
38
28.9
71 .1
38
26.3
73.7
continuing ed.b
--not required
--required
38
94.7
5.3
38
89.5
10.5
brochures^
--not distributed
--distributed
27
92.6
7.4
27
88.9
11.1
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for these variables reports only the relative
frequency of the respective responses.
121
Table 5.4 (continued)
Descriptive Statistics
Selected Variables, 1987 Survey : R.N.a
Variable n
1981
mean s.d. n
1984
mean s.d.
PUB
(% public mbrs) 36 .122 .111 37 .140 .099
CENT^
--decentralized
--partially cent
--centralized
34
76.5
17.6
5.9
34
73.5
20.6
5.9
DIS 12 2.439 2.501 13 2.645 3.092
endorsement^
--no endorsement
--endorsement
38
26.3
73.7
38
26.3
73.7
continuing ed.b
--not required
--required
38
81 .6
18.4
38
78.9
21 .1
brochures^ 27
--not distributed
--distributed
85.2
14.8
27
63.0
37.0
a. These data are used in the estimations reported in
Tables 5.7, 5.8, 5.9 and 5.11. The source of these data is
the survey conducted by the author in 1987. Descriptive
statistics for intervening years are available from the
author.
b. "Means" for
frequency of the
these variables reports only the relative
respective responses.
122
Table 5.5
Means and Standard Deviations
Selected Variables, 1984&
M.D
.b D.C.c
Variable n mean s.d. n mean s.d.
PUB 50 .155 .095 16 .186 .104
DIS 50 2.346 1 .898 n/a — —
COMP n/a
--
— — 49 .223 .121
restrictiveness
index 50 1 .340 1 .080 50 2.020 .999
endorsement^
--no endorsement
--endorsement
47
17.0
83.0
50
16.0
84.0
continuing
education^
--not required
--required
50
52.0
48.0
n/a - - —
reporting
disc, actions 50 6.480 3.654 n/a
a ; These data are used in the estimations reported in
Tables 5.6 (D.G.), and 5.10 (M.D.).
b. Federation of State Medical Boards, The Exchange 1986,
Kathryn Hill, editor. Fort Worth, Tx.: author, 1986.
Federation of State Medical Boards, "1984 disciplinary
actions as reported to the Federation of State Medical
Boards of the U.S., Inc.," unpublished data, 1986.
c. Federation of Chiropractic Licensing Boards, Official
Directory of Chiropractic Licensing Boards with Licensure
and Practice Statistics, 1985-1986, Glendale, Ca.: author,
1986.
d. "Means" for these variables reports only the relative
frequency of the respective responses.
123
(although the means tend to cluster around a relatively low
15 to 20% mark). All of the occupations show a strong
tendency toward decentralized administrative structures.
However, only osteopathic physician licensing boards appear
to have completely resisted the movement toward
centralization. It is noteworthy that all four occupations
are controlled by strongly decentralized licensing boards.
Equation One: Entry Restrictions
The first equation attempted to capture variations
between states in the general restrictiveness with which
they regulate the entry of health professionals into
practice. Four restrictions were proposed for inclusion in
a "restrictiveness index :" age limitations, morality
requirements, citizenship requirements, and the presence or
absence of qualification endorsement. Data for all four
restrictions were only available for 1984 (published by the
Clearinghouse on Licensure, Enforcement and Regulation,
1986a), however respondents to the survey of licensure
agencies provided historical information on the endorsement
question.
The restrictiveness index could only be estimated for
two occupations (physicians and chiropractors). Only the
chiropractor estimation produced a significant fit. Table
5.6 shows the results of that estimation on the
chiropractic profession. Two legislative demand variables
124
Table 5.6
Equation 1
Chiropractors, 1984
(OLS Estimation)
Dependent variable: restrictiveness index
Variable Estimate t
PUB(-) -3.687*** -3.024
TURN(-) .003 0.326
NR(+) -.008 -1.300
C(-) -.088* -1.767
ED(-) -.033 -1.509
URB(-) .028*** 2.753
INFO(-) .003 1 .250
COMP(+) 1.474 1 .077
Model :
F = 3.086***
r2 = .40
observations = 44
(expected signs follow variable names)
***Significant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
125
provide the major effects in this estimation: urbanization
(URB) and the percentage of public membership on the
chiropractic licensing boards (PUB). The PUB variable
operates in the expected direction; the higher the
percentage of public members, the less restrictive the
legislatively adopted licensing policies are likely to be.
However, the urbanization variable operates in an
opposing direction. It was expected that urbanization
would facilitate information exchange between consumers due
to proximity and the concentration of major media. This
variable may operate contrary to expectations because of
the nature of the occupation being analyzed. Chiropractors
frequently locate in rural areas and operate as primary
care health care providers due to the unwillingness of
physicians to locate in these areas. Rural states may be
faced with the dilemma of loosening entry restrictions to
attract more chiropractors for this purpose or adopting
restrictive policies that assure a higher quality of care
but which drive away these practitioners. In the latter
case, the rural areas may then be forced to do without any
care.
An alternative explanation employs the notion that
urban consumers are more sophisticated than their
counterparts in rural states. These cosmopolitan consumers
may be skeptical of the qualifications and training of
chiropractors (an attitude that may be encouraged by their
126
physicians) and may encourage their legislators to adopt
more restrictive policies in an attempt to assure quality
care.
Only one legislative supply variable significantly
affects the restrictiveness index for chiropractic
licensing. The results regarding C, the consumer
philosophy variable, indicate that states with a
predilection toward consumer protection tend to adopt more
restrictive chiropractic licensing policies, as expected.
While only one occupation could be tested using the
restrictiveness index as the dependent variable, historical
information, however, was available regarding the
"endorsement" component of the index. Table 5.7 shows the
results of a logistic analysis of the first equation using
the presence or absence of endorsement as the dependent
variable. This table pools the four occupations (M.D.,
D.O., D.C., and R.N.) to increase the number of
observations and so that historical trends can be
highlighted. Osteopaths (D.O.s) are the omitted
occupation.
Two legislative demand variables significantly affect
the adoption of endorsement policies and both operate as
expected. The consistent direction and significance of the
effects from the COMP variable, the number of professionals
per thousand, supports the contention that states with more
competitive health occupational labor markets are likely to
127
Table 5.7
Equation 1 : All Occupations
(Logistic Estimation)
Pooled
Dependent variable : endorsement
Variable 1980 1981 1982 1983 1984
PUB(+) 11.390**
(3.32)
13.761**
(4.60)
16.840**
(5.91)
17.835**
(5.55)
8.764**
(2.85)
TURN(+) .109**
(4.31)
.157**
(6.26)
-.097*
(3.23)
-.082
(2.50)
.043
(1 .17)
NR(-) -.037
(1.75)
-.036
(2.10)
-.041*
(2.79)
-.037*
(2.65)
-.026
(1 .41)
C(+) -.012
(0.00)
-.360*
(2.67)
-.095
(0.14)
-.020
(0.01)
-.308*
(3.15)
ED(+) -.121
(1.11)
-.082
(0.89)
-.049
(0.16)
- .089
(0.50)
-.013
(0.04)
URB(+) .004
(0.02)
.033
(0.73)
-.0058
(0.03)
.003
(0.01)
.038
(2.05)
INFO(+) .003
(0.26)
-.024
(1.95)
-.0002
(0.00)
-.023
(1.72)
.01 1
(0.57)
COMF(-) -.534
(1.76)
-.345
(1.07)
-.721*
(2.90)
-. 605
(2.30)
-.556*
(3.33)
MD 1 .529
(0.63)
.207
(0.01)
1 .686
(0.65)
.643
(0.11)
1 .810
(1.00)
DC -3.430
(2.09)
-4.778**
(3.81)
-2.857
(1.88)
-2.830
(1 .99)
-1.667
(1.13)
RN 5.761
(2.50)
4.297
(1.73)
8.447**
(4.03)
6.281*
(2.97)
6.562**
(3.69)
Model Chl2
Obs .
31.20***
50
34.12***
51
35.29***
49
32.70***
49
27.51***
53
(expected
are noted
signs follow variable
in parentheses under
names and chi square values
each parameter estimate)
***Signifleant at .
**Signifleant at .
^Significant at .
01 level
05 level
10 level
128
spurn the adoption of endorsement policies.
The other legislative demand variable that shows
significant effects is the percentage of the licensing
board composed of public members (PUB). These results
support the theory that public members would promote
endorsement as an efficient regulatory strategy.
The three legislative supply variables all
demonstrated some significant effects. The first variable,
the number of voters per legislative representative (NR),
was expected to further illustrate the effect of strong
professional interest groups within the state. High values
of this variable characterized states with strongly
heterogeneous populations which were unlikely to be able to
mobilize effective lobbying efforts on consumer issues.
The evidence on equation 1 tends to support that notion, as
states with low values on this dimension were more likely
to support endorsement policies.
The second legislative variable, TURN, behaved
inconsistently. This variable represented the extent of
competition for legislative seats and it was expected that
politicians in states with relatively large turnover would
support less restrictive licensing policies as a means of
demonstrating their support for consumer concerns. The
fact that equation 1 shows mixed results on this variable
may exemplify the confusing effects that licensing policies
engender among consumers and politicians. A politician
129
seeking voter support could conceivably vote for either
side of this issue, depending on whether the representative
takes a position protecting state resources (i.e.,
residents who belong to the regulated professions) or
maximizing efficient regulation and reducing consumer
costs.
The third legislative supply variable, C, which
addressed state attitudes toward consumer protection, did
not perform as expected. This variable represents the
percentage of consumer-oriented laws adopted by a state
(from a total of 17 programs). According to the results in
Table 5.7, states with low scores on the consumer
philosophy variable are more likely to adopt a policy of
endorsement. Since it has been argued that consumer-
oriented boards and legislatures would adopt endorsement
policies, this finding does not support the theory.
However, it should be noted that these effects are only
significant in two years (1981 and 1984) and may indicate
unusual situations in those years.1
Two alternative estimation strategies which pooled
state observations over time were conducted. The results
^All estimations were checked for potential
multicollinearity problems. Analysis of the correlation
coefficients of all variables demonstrated no evidence of
high multicollinearity.
130
were consistent with those presented in table 5.7.^
Equation Two : Mandatory Continuing Education
The second equation represents a method to assess the
extent to which states attempt to ensure continuing
competence on the part of regulated health professionals.
While researchers have questioned the connection between
continuing education programs and post-education
professional behavior, mandatory continuing education
remains one of the few accepted strategies for skill
maintenance. The presence or absence of mandatory
continuing education is used in this equation as the
categorical dependent variable.
Equation 2, as specified in the previous chapter,
includes nine variables. However, due to the
unavailability of data for two variables (CLOUT and DISC),
^Estimations of the pooled cross-sectional analyses
were conducted using the variance components model and a
first-order autoregression. The variance components model
(also known as the Fuller-Battese error term adjustment
method; SAS Institute, 1985) assumes that the error term is
homoseedastic and holds autocorrelation effects constant
over time (i.e., there is no assumption that these effects
diminish). The autoregression method assumes
homoscedasticity and first- order autocorrelation. While
there is some theoretical support for an alternative
estimation procedure which would assume heteroscedasticity
and diminishing autocorrelation for these equations, no
such estimation model was available.
Cross-sectional units were pooled for six years :
1975, 1977, 1979, 1981, 1983, and 1985. The number of
states included in each analysis can be determined by
dividing the number of observations by these six years.
131
an abbreviated equation has been specified. Table 5.8
illustrates the outcome of the estimation process over the
entire ten year period for all four occupations studied.
Again, osteopaths are the omitted occupational category.
As the F values indicate, the model displays a strong fit.
The r2 values reveal that approximately half of the
variation is explained by this model.
The legislative demand variables appear to provide
most of the significant effects in equation 2. Most
notably, the education variable (ED) shows consistent,
significant results in the expected direction. This
variable is the only variable in the equation that is
significant in all ten years analyzed and the results
indicate that states with better educated populations are
more likely to mandate continuing education requirements
for medical doctors, osteopaths, chiropractors, and nurses.
The education variable was intended to control for the
state population's capacity to act as informed consumers,
with the expectation that more highly educated consumers
make better purchasing decisions. In the case of this
equation, it seems more likely that better educated
populations place greater value in the educational process
and expect their health professionals to endorse that
notion. In addition, more highly educated populations may
better recognize the rapid rate of health care innovation
and the need for periodic updating of skills.
132
Table 5.8
Equation 2: All Occupations Pooled
(OLS Estimation)
Dependent variable : mandatory continuing education
Variable 1975 1976 1977 1978 1979
PUB(+)
.909**
(1.98)
.725
(1.56)
.740
(1.60)
.612
(1 .19) (1
.772*
.65)
NR(-) .002
(1.15)
.001
(.611)
.001
(.624)
.003
(1.49) (1
.002
.20)
C(+) .018
(.92)
.024
(1.20)
.029
(1.46)
.018
(1.08)
(1
.033**
.92)
ED(+) .018***
(2.43)
.020***
(2.42)
.017**
(2.24)
.025***
(3.39) (2
.020***
.71)
URBC+) -.004*
(-1.68)
-.003
(-.843) (
-.003
-1.08)
- .004
(-1.45) (-1
.003
.14)
TURN(+) -.001
(-.54)
.003
(.98)
.003
(.97)
-.002
(-.78) (-
.0005
.17)
INFO(+) -.001 -.001
(-1.29) (-1.22) (
-.001
-1.27)
-.001
(-1.58)
(-1
.0009
.07)
MD -.390** -.376**
(-2.13) (-2.05) (
-.371**
-2.03)
-.296
(-1 .51)
-3
(-1
.11
.57)
DC -.0008
(-.004)
.027
(.14)
.020
(.10)
.077
(.39) (
.062
.31)
RN -.495*** -.431***
(-2.86) (-2.46) (
-.434***
-2.47)
-.367**
(-1.96) (-1
.349*
.83)
Model :
F 5.65** 5.65*** 5.64*** 5.58*** 5.46***
r2
Obs .
.50
65
.50
65
.50
65
.49
67
.48
69
(expected
noted in
signs follow variable names and t values are
parentheses under each parameter estimate)
***Significant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
133
Table 5.8 (continued)
Equation 2: All Occupations
(OLS Estimation)
Pooled
Dependent variable : mandatory continuing education
Variable 1980 1981 1982 1983 1984
PUB(+) .677
(1.57)
. 748*
(1.67)
.661
(1.24)
.763
(1.43) (1
.661
.19)
NR(-) .001
(1.05)
.001
(1.00)
.001
(.76)
.001
(1.01)
(
.001
.75)
C(+) .032**
(1.98)
.0007
(.04)
-.024
(-1.33)
-.014
(-.75)
(-
.014
.69)
ED(+) .020***
(2.69)
.019***
(2.71)
.027***
(2.72)
.011**
(2.24) (3
.027***
.33)
URB(+) -.001
(-.55)
.002
(.81)
.005**
(1.94)
.004
(1.55) (1
.004
.29)
TURN(+) -.006*
(-1.67)
-.001
(-2.86)
.001
(.23)
-.0003
(-.07)
(
.0001
.03)
INFO(+) -.0005
(-1.27)
-.001
(-1.08)
-.002*
(-1.74) (
-.003**
-2.00) (-2
.004***
.64)
MD -.208
(-1.18)
-.426**
(-2.28)
-.395**
(-2.02) (
-.449**
-2.30) (-2
.416**
.05)
DC .321*
(1.79)
.147
(.78)
.149
(.76)
.165
(.85) (
.113
.55)
RN -.230
(-1.35)
-.406**
(-2.27)
-.420**
(-2.33) (
-.431**
-2.34) (-2
.425**
.22)
Model ;
F 6.16*** 5.21*** 5.04*** 4.83*** 4
2 ^ ^ ^ ^
r2
Obs .
.48
76
.43
79
.47
65
.46
65
. 44
64
(expected
noted in
signs follow variable names and t values are
parentheses under each parameter estimate)
***Significant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
134
The importance of the education variable could be
considered curious when juxtaposed with the results of
another legislative demand variable, information
availability (INFO). The information variable shows
significant negative effects during the last three years
studied (1982-1984). Positive effects were expected
because consumers with access to information should be less
likely to require and/or request regulatory remedies.
However, in the case of this dependent variable,
opposite effects could be consistent with a consumer
perspective. It makes some sense that consumers with less
access to information would wish to rely on a regulatory
framework to assure that their health care providers are as
current as possible. After all, it will be difficult for
these consumers to independently assess how well their
providers maintain their skills. Conversely, consumers
with especially good access to information may be more
comfortable with their own abilities of skill assessment
and may not rely on regulation.
While the urbanization variable is significant in two
of the ten years, the direction of the effect is
contradictory. It is not likely that this variable
contributes much to the adoption of mandatory continuing
education.
The final legislative demand variable is PUB. It
appears that states in which licensing boards have a higher
135
percentage of public members are more likely to adopt
mandatory continuing education. While this effect is
consistent with the evidence in equation 1, weaker results
are evident since this variable is only significant in
three out of the ten years.5
The legislative supply variables show very little
impact on the dependent variable. The NR variable is not
significant in any year, and the TURN variable is only
significant in one year. The consumer philosophy variable
shows significant effects in only two years (1979 and
1980).
Thus, it appears that the demand variables drive the
adoption of mandatory continuing education. This outcome
is not surprising since health care professionals have
opposed the imposition of these requirements for a number
of years (especially physicians). Because of this
opposition, the adoption of the policy can be clearly
identified as a "consumer" issue, which may not be the case
with the endorsement policy variable in equation 1.
^The public membership variable shows a strong effect
on the adopton of mandatory continuing education for
nurses. In a separate analysis, the public membership
variable was a significant predictor of adoption of this
policy in four out of the five years studied.
136
Table 5.9
Equation 2 (abbreviated): Pooled Analysis
(Variance Components Model Estimation)
Dependent variable: mandatory continuing education
Variable M.D. R.N.
Pubper(+) 0.935* 1.126***
(1.66) (3.76)
NR(-) 0.001 0.003
(0.51) (1.39)
C(+) 0.014 0.008
(0.91) (0.99)
Obs. 78 156
(expected signs follow variable names and t values are
noted in parentheses under each parameter estimate)
***Significant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
137
Table 5.8 also provides some insight into differences
between the four occupations included in this study
(osteopaths--D.0.s--were included as a control occupation).
During all ten years, nurses and physicians are less likely
to be required to meet continuing education standards than
osteopaths, and in only four out of the twenty combined
years are these effects not significant. This result is
consistent with the previous note that mandatory continuing
education is a point of contention for consumers and health
care professionals alike.
A pooled cross-sectional analysis was also estimated
for equation 2, using the same techniques applied in
equation 1. As Table 5.9 shows, this analysis revealed
significant effects for the public membership variable on
both physicians and nurses. It should be noted that this
equation was abbreviated in order to maximize the number of
observations.
Equation Three : Consumer Information
The third and fourth equations are used to investigate
board-controlled policies and activities rather than
legislatively enacted policies. This distinction is
important since public member influence should more
directly affect board policies than legislative policies.
Similarly, differences between centralized and
decentralized agencies were expected to be magnified in
138
administrative areas. Unfortunately, it is more difficult
to obtain data from licensing agencies than legislatures
(or, perhaps, there are fewer published sources) so the
tests of the board related theories are necessarily
limited.
The third equation is based on the theory that
consumer-oriented public members would encourage the
dissemination of information to consumers. The dependent
variables that are used in this test include: 1) the
number of agencies that receive notification of
disciplinary actions against practitioners ; and, 2) the
dissemination of brochures to consumers regarding licensing
agency activities and the complaint process. The former
has been collected by the Federation of State Medical
Boards (FSMB) for calendar year 1984, while the latter was
compiled from the survey sent to licensing agencies and
includes data from 1975-1984.
Table 5.10 provides estimates of the effects of five
independent variables on the dissemination of disciplinary
action reports for physicians. Only one variable was found
to be significant: centralization. It appears that more
centralized agencies are likely to provide a comprehensive
reporting service for disciplinary actions. This is
consistent with the expected effects and could reflect the
theoretical hypothesis that centralized agencies have
better resources and stronger sensitivity to the need for
139
Table 5.10
Equation 3
Physicians (M.D.), 1984
(OLS Estimation)
Dependent variable
Variable
Pubper(+)
C(+)
Ed(+)
Info(+)
Cent(+)
number of agencies receiving
disciplinary action reports
Estimate
0.144
0.212
-0.097
- 0.016
1 .847
■kie
t
0.023
1 .239
-1 .237
-1.243
1 .961
Model :
F = 1.75
r2 = .18
observations = 45
(expected signs follow variable names)
***Signifleant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
140
Table 5.11
Equation 3: Pooled Analysis
(Variance Components Model Estimation)
Dependent variable; dissemination of brochures to
consumers
Variable M.D. R.N.
Pubper(+) 1.643***
(4.06)
0.833**
(1.96)
C(+) 0.010
(0.86)
0.016
(1.43)
Info(+) -0.0004
(-0.4191)
0.0003
(0.42)
Cent(+) -0.233
(-1.59)
-0.066
(-0.46)
Obs. 66 132
(expected signs follow variable names and t values are
noted in parentheses under each parameter estimate)
***Significant at .01 level
**Signifleant at .05 level
*Signifleant at .10 level
141
information dissemination. Public membership does not
affect this dependent variable, perhaps because public
members consider the notification of agencies a staff
responsibility. The pooled analysis reported in Table 5.11
shows that over time the public members on occupational
licensing boards exert significant influence in the
dissemination of brochures which explain the complaint
process to consumers. This outcome was also expected,
since consumer members on licensing boards may be able to
increase the awareness of other board members and agency
staff with regard to the need for consumer information.
Centralization does not show a significant effect in
this estimation. This may mean that the staff of central
agencies do not adopt a consumer perspective or it could
demonstrate staff skepticism regarding the effectiveness of
consumer information initiatives.
Equation Four; Discipline
The fourth equation sought to define the relationship
between both centralization and public membership and the
increasingly important disciplinary activities of licensing
agencies and boards. This analysis would also provide some
insight into the role of professional clout in the
disciplinary process.
However, licensing agencies were generally unable to
provide complete data on disciplinary actions taken over
142
time. Several reasons may account for this incapacity.
First, many of the agencies now depend on state attorneys
general to investigate, prepare, and prosecute (as
necessary) disciplinary cases. Consequently, the licensing
agencies do not bother to maintain records regarding these
cases. Second, disciplinary activities have only recently
become issues with high public visibility and licensing
boards have reflected that emergence by starting to collect
data. Third, professional members still comprise the
majority of virtually all licensing boards studied and
disciplinary actions are not the type of professional
activity they wish to publicize.
In short, there are no significant results to report
on equation four. Only 11 nursing licensing boards
reported on disciplinary actions, and even fewer
chiropractic licensing boards provided these data.
Physician licensing boards were somewhat more forthcoming,
but still inadequate to generate parameter estimates, even
when all occupations were pooled.
The Federation of State Medical Boards has recently
released summary disciplinary data from participating
physician licensing boards for calendar years 1984 and
1985. These data provide the first glimpse of an
operational comprehensive disciplinary data consortium and
these efforts should be commended. However, two years of
data do not provide an adequate picture of trends in
143
disciplinary activities, nor can they be expected to
provide meaningful tests of the relationships previously
identified. Estimations of equation 4 based on these data
also yielded insignificant results.
Summary
Even though a number of the variables identified in
the empirical specification chapter of this study have not
been incorporated into the reported estimations, it may be
instructive to consider the results in terms of the supply
and demand categories for both legislative and licensing
board equations. The legislative tests will be most
informative since they provided the most complete
estimations.
Several demand variables were dropped from the
equations due to data unavailability (e.g., CLOUT and
DISC). Of the remaining five demand variables only two
offered consistently strong results: COMP and PUB. The
other three variables, ED, INFO, and URB demonstrated no
consistent significant effects, although the education
variable showed strong results in equation 2. Several
explanations have been offered for the interactions
evidenced between ED and INFO in equation 2.
The relationship between COMP and PUB exposes a direct
confrontation between the public interest and special
private interests. As noted earlier, it was expected that
144
States with relatively large concentrations of regulated
professionals would be likely to adopt restrictive
policies. The results of equation 1 substantiate that
expectation.
However, it is not clear that the private interest
prevails in all cases. Both equation 1 and 2 portray
consistent, significant effects from public membership
(PUB). Clearly, the public interest is being served
through the addition of public members to health
occupational licensing boards.
One area of concern should be highlighted before
accepting these findings unequivocally. As mentioned in
the theory section of this study, it was expected that
public members would affect legislative policies (like
endorsement and mandatory continuing education) indirectly,
at best. Public members of licensing boards may be asked
to testify at legislative hearings on licensing issues, but
their influence in such situations can hardly be considered
overpowering given the relatively disorganized character of
most consumer advocacy efforts at the state level. The
surprisingly strong effects may simply reflect a general
trend within a state toward consumer-oriented licensing
policies. That is, the appointment of consumers to
licensing boards may be one part of a larger strategy
within the particular state to make licensing more
effective for the consumer.
145
To some degree, the likelihood of this alternative
theory can be examined within the present framework.
First, in all equations, the public membership variable was
lagged two years in the expectation that consumers would
require a reasonable time to become oriented to board
missions, roles, and operating procedures. It is clear
that the effects follow sequentially from the placement of
the public members. Second, the consumer philosophy
variable measures a wide variety of laws and could be
expected to reveal states with a predilection toward
consumer protection in general. The fact that the consumer
philosophy variable generated inconsistent results in no
way detracts from its role as a control for this possible
effect. Third, and perhaps most compelling, the robust
results on the legislative equations were strongly
reinforced by the consistent effects of public membership
in the third equation which addressed board policies alone,
and which public members should be best able to impact.
There were three supply variables in the legislative
equations: NR, TURN, and C. The legislative turnover
variable suffered from mixed results as no consistent
pattern was revealed in equation 1 and it had no
appreciable effect in equation 2. The ratio of voters to
representatives (NR) and the state's predilection toward
consumer protection (C) were equally confusing. While NR
showed a significant negative effect in the first equation,
146
it showed no effect in the second. The consumer philosophy
variable reversed direction in the first two equations,
first yielding a negative effect, and then a positive
result.
There may be a logical explanation for the behavior of
the NR variable, since it was intended to be sensitive to
special interest influence. In short, professional
interests may be more concerned about issues of endorsement
and reciprocity than mandatory continuing education.
The behavior of the C variable may be explained in a
similar manner. Endorsement policies may be considered
less of a consumer issue than a professional concern, since
legislators may be convinced of the need for professionals
to judge the qualifications of their peers in order to
maintain quality. Mandatory continuing education can be
clearly identified as a consumer issue, and may be
considered somewhat harmless by legislators. Even if the
effectiveness of the requirement is doubtful, a legislator
can point to a vote mandating such standards as proof of an
interest in protecting consumers.
While data limitations restrict the extent to which
conclusions can be drawn regarding the licensing board
equations, several trends do bear mentioning. Two
variables showed significant effects in the analyses of the
third equation: the public membership variable and the
centralization variable. The effect of the public
147
membership variable in equation 3 simply reinforces the
notion that public members have had a significant impact on
occupational licensing policies.
The centralization variable affected the notification
of other agencies about disciplinary actions in the
physician equation, but did not affect the dissemination of
brochures to consumers, as reported in the pooled cross-
sectional analysis. This may mean that centralized
agencies are more willing to adopt a perspective
sympathetic to the regulated professional since the first
task bypasses the consumer entirely. In the first
estimation of the third equation, the disciplinary actions
are primarily reported to other agencies, not consumers.
It is clear that board membership reforms have
affected the adoption of consumer-oriented health
occupational licensing policies. Unfortunately, data
limitations preclude a more extensive investigation of
policies directly controlled by licensing boards.
Six hypotheses were offered in the theory chapter of
this study. Three of these involved legislative activities
and three sought explanations of licensing board policies.
The first legislative hypothesis asserted that
unsophisticated electorates would demand more occupational
licensing restrictions. The results of these estimations
confirmed this hypothesis for the second equation because
of the significant effects of the education and information
148
variables, but no significant effects were shown for these
variables in equation 1, In fact, in some of the
estimations of equation 1, the urbanization variable was
significant but did not perform as expected.
The second legislative hypothesis addressed the
political clout of professional groups. It was expected
that states with organizations representing large
percentages of professional members would enact more
restrictive licensing policies. This hypothesis could not
be tested as anticipated due to data unavailability and
poor response rates. However, states with high percentages
of regulated professionals were more likely to enact
restrictive policies. Consequently, while the dimension of
lobbying effectiveness has been lost, it seems clear that
professionals seek to limit competition.
It was also hypothesized that politically unstable
states would generate less restrictive policies, since
candidates would support the electorate as a means of
obtaining votes. The results on this issue are
unambiguous ; stability had no effect on the adoption of the
licensing policies studied.
The first of the three licensing board hypotheses
speculated that states with higher percentages of public
members on the licensing boards would adopt less
restrictive policies. This hypothesis has been
substantially confirmed.
149
The second hypothesis speculated that centralized
agencies would adopt consumer-oriented reforms. It is
difficult to draw any conclusions regarding this question
because of data restrictions, although it is clear that
centralized agencies are more likely to notify agencies of
disciplinary actions taken against incompetent
practitioners.
The final hypothesis surmised that licensing boards in
states with sophisticated consumers would adopt consumer-
oriented policies. This hypothesis was not confirmed since
no effects were shown by the consumer sophistication
variables.
To summarize, the first two legislative hypotheses
were partially confirmed by these results while the third
hypothesis was not substantiated. Only one of the
licensing board policy hypotheses could be proven, but the
results provided substantial evidence that public members
on licensing boards generate consumer-oriented licensing
policies.
150
^ 0
in
i
152
< P 0
< p . &
^ 0
^ 6 ^
Conclus ions
The results of this study provide some insight into
the determinants and effects of public policy in the field
of health occupational licensing. However, as with any
study in the public policy field, new questions emerge as
the implications of new knowledge are recognized. This
chapter provides a brief discussion of three issues.
First, the contributions of the present study to research
in the occupational licensing field are summarized.
Second, the implications of this research in occupational
licensing policy and other regulatory fields are outlined.
Finally, some of the next steps for future investigations
into the field are discussed.
Contributions to the Licensing Research
Prior to this study, the licensing research emphasized
the underlying theoretical constructs of public versus
private interests. Considerable work focused on the
introduction of occupational licensing and sought to
determine the impetus for these policies, since the
motivations were not transparent and might be different
from what they seemed. Relatively few studies focused on
the determinants of the regulatory policies that affected
professionals once the decision to license had been made.
The present study attempts to broaden the research
160
base in this area by examining some of the potential
motivating forces affecting the introduction and
implementation of legislative and board policies in health
occupational regulation. The research sought to determine
factors driving the adoption of policies regulating
professional entry, continuing competence, and information
dissemination activities of licensing boards.
Several areas of discovery should be emphasized.
First, this research demonstrates that policy-based
investigations can provide some insight into the competing
interests which dominate the regulatory framework. This
study confirms that both the public interest and private
interests wield considerable power in the adoption of these
policies, although the study does not determine which
interests prevail in all cases. For example, while
equation 1 demonstrated that public members significantly
affected the adoption of endorsement policies, states with
high concentrations of professionals were less likely to
sanction these policies.
Second, this study provides some insight into the
interaction between state legislatures and occupational
licensing boards. Several of the policies examined require
legislative action, while others can be adopted and
implemented by the individual licensing boards. The
results affirm the importance of the licensing board in the
legislative deliberation process. In both of the
161
legislative equations, public membership on licensing
boards influenced the confirmation of consumer oriented
strategies. In the single equation which estimated similar
effects on licensing board policy, states with higher
percentages of public members were more likely to
distribute brochures to consumers to explain the purpose of
licensing and the disciplinary process against incompetent
practitioners.
Third, the study points out the need for further
examination of the strengths and weaknesses of
centralization. It appears that centralized agencies may
be concerned about the dissemination of information, but
they focus on professionals rather than consumers. In this
investigation, centralized agencies were more likely to
notify potential employers regarding disciplinary actions
taken, but they did not affect the distribution of consumer
information. It could be concluded that centralized staff
embrace a technical orientation, with little room for
consumer education efforts. However, the limited scope of
this analysis illustrates the need for further
investigation.
Fourth, a number of state characteristics affect the
adoption of consumer oriented licensing policies. In the
first equation, the legislative supply variables involving
the turnover of legislators and the number of voters per
representative were predictors of the adoption of
162
endorsement policies. Interestingly, the state's
philosophy toward consumer protection behaved erratically,
contributing to the adoption of these policies in some
cases, and significantly deterring adoption in other cases.
In the second equation, the states with higher education
levels were significantly more likely to mandate continuing
education for health professionals than other states, while
states with less information available to consumers were
more likely to adopt these policies. This could be
expected since more highly educated consumers expect their
practitioners to maintain current skills and those with
less information are likely to seek regulatory measures to
assure continuing competence.
Fifth, this research points out the need for further
investigation into the policies which affect regulated
professionals and the consuming public. To a large degree,
it appears that there is some consensus on the need for
regulating health professionals. As noted in the
introductory chapter, these professionals have been
regulated since the turn of the 20th century ; the decision
to regulate has been made and reaffirmed on a regular
basis. The question then is not whether to regulate, but
rather how best to regulate. This research confirms that
the public membership reforms have assisted in re-balancing
the regulatory system. All three equations have reinforced
the importance of public members : in the first equation
163
they were likely to cause the adoption of endorsement
policies, in the second equation they contributed to
mandating continuing education, and in the third equation
their impact on the distribution of consumer information
was significant.
Implications for Public Policy
One of the primary focal points of this study is to
determine the impact of membership reform on legislative
and licensing board policies. The results described
confirm that this reform can be considered one method for
providing an effective consumer orientation within the
regulatory setting. The results demonstrate that consumer
representation on occupational boards and commissions
constitutes considerably more than a simple "sop" to public
interest advocates. The evidence suggests that consumer
members exert effective influence on both legislative and
board policies affecting occupational licensing. This
finding is particularly impressive when balanced against
the generally pessimistic expectations of occupational
licensing policy analysts (Cohen, 1980; Shiraberg, 1982;
Schütz, 1983; Meier, 1985).
These findings also indicate that while special
interests may have an advantage in being able to advocate
their positions, it is premature to assume that their will
prevails in all cases. Clearly, consumer advocates and
164
elected and appointed officials must carefully observe and
monitor the policy-making process, but this research shows
that public members can perform their roles capably.
Cohen (1980) has recommended that licensing boards be
composed exclusively of consumer members, with
professionals serving as advisors. While it isn't clear
that any state is prepared to accept such a radical change,
it may be reasonable to propose that the percentage of
public members on licensing boards be increased. At
present, no state allows more than 40% of these health
licensing boards to be composed of public members, and most
permit a considerably lower percentage. Since this
research shows that consumer members can provide effective
and responsible representation, it may be worthwhile to
permit public members to extend their influence and control
of this regulatory process.
Other regulatory agencies which use advisory and
decision-making boards may find it fruitful to add public
representatives to help make the regulatory process more
efficient. While this recommendation must be tempered with
the knowledge that many regulatory activities require
considerable expertise, the occupational licensing process
is itself a complex and dynamic regulatory initiative and
public members on occupational licensing boards have
demonstrated their effectiveness through this research.
165
Areas for Future Investigation
There are several important areas for future research
that deserve investigation. Some of the areas are
substantive in nature, while others refer to the need for
better statistical analysis.
The most obvious statistical need relates to the error
term adjustment method in the pooled time series analyses.
The methods reported in the results chapter use assumptions
that may be too restrictive. It would be useful to analyze
the pooled time series data with assumptions of
heteroscedasticity and diminishing autocorrelation effects.
An additional statistical concern is the response
rate. While responses were adequate for the review of some
policy issues, other areas (like disciplinary actions)
could not be investigated. This limitation causes some
concern in generalizing the findings of this study to the
specific occupations and the broader area of occupational
regulation, since the policies studied may not be
representative of licensing policies overall. As the
Clearinghouse for Licensure, Enforcement, and Regulation
(CLEAR) and the Federation of State Medical Boards (FSMB)
refine and broaden their data collection efforts it will be
possible to produce generalizable studies with more
confidence.
It should be recognized also that this study only
included a relatively small number of regulatory policies.
166
The occupational regulation process is complex and dynamic
and some of the policies studied will be more uniformly
adopted in future years. However, there are a number of
other policies that have been adopted and implemented by
licensing boards that deserve further study. One of these
areas involves further investigation of the effects of
centralization.
It is particularly disappointing that board policies
regarding the disciplinary action process could not be
adequately researched. The disciplinary process must be
considered a key consumer protection area, and one of the
primary justifications for occupational regulation. The
inability of licensing agencies to respond to the survey
items related to disciplinary actions may indicate that
they do not focus on this activity. This potential is
troubling.
It is also recognized that this study affects a very
specific group of professions: primary care providers in
the health care field. Future research should extend this
research into other occupations, including other health
occupations. This research might demonstrate different
effects since it is expected that public board members of
other health occupations may serve as strong advocates for
professions fighting for credibility within the health
system. Moreover, this research could be extended to
other, non-occupational, types of regulation to determine
167
the general effects of public membership on regulatory
boards.
To summarize, public members of health occupational
licensing boards significantly affect the adoption of
consumer oriented policies, such as endorsement, mandatory
continuing education, and the distribution of consumer
information. The staff of centralized agencies appear
likely to adopt a technical orientation to their
responsibilities, with minimal interest in consumer
education initiatives. A number of other state
characteristics affect the adoption of individual policies,
but these attributes are generally consistent with the
theories offered to explain the enactment of these
regulatory policies.
168
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Appendix
Occupational Licensing Questionnaire
Instructions
a. Please fill out a separate questionnaire for each
occupation which is regulated by your organization.
b. If your agency has already developed and published
summary statistics for the data categories and years noted,
feel free to append a copy of the statistics in lieu of
transferring the data to this form.
c. Please indicate the person filling out the
questionnaire, so that the research staff can follow-up
with the appropriate person should there be any questions.
d. If your state does not regulate this occupation, please
indicate on question one.
1. This questionnaire covers the following occupation (one
only, please circle the appropriate occupation):
a. M.D.
b. D.C.
c. D.C.
d. P.A.
e. R.N.
f. N.P.
g. C.N.M.
2. Person filling out form :
3. Address:
4. Phone :
5. Number of licensees in this occupation (Annual, 1975-
1984):
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
184
1 982 -
1983 -
1984 -
6. Number of applicants seeking licensure in this
occupation (Annual, 1975-1984):
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
7. Number of applicants taking licensure test (Annual,
1975-1984):
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
8. Number of applicants passing licensing test (Annual,
1975-1984):
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
9. What is the present passing score for the test?
10. How has the passing score fluctuated between 1975 and
1984 (e.g., passing score in 1977 was 72, in 1980 it
increased to 76, etc.)?
185
11. What is the state's policy with respect to out-of-
state applicants?
a. Endorsement (applicant's qualifications are
reviewed without respect to state of origin)•
b. Reciprocity (applicant's qualifications are only
accepted if there is an agreement between state of
origin and this state)•
c. No out-of-state applicants accepted
d. No policy
e. Other (explain)
12. How long has this policy been in effect?
13. What was the previous policy?
14. Does this board have a distinct budget separate from
other licensing boards? If yes, what are the annual budget
figures for 1975-1984?
1975 -
1976 -
1 977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
15. Is the Board responsible for issuing licenses, or does
some other entity (for example, a central department)
assume that responsibility?
a. What is that entity?
b. Has this policy changed since 1975? When?
16. Is the Board responsible for approving the education
standards of applicants, or does some other entity assume
that responsibility?
a. What is that entity?
b. Has this policy changed since 1975? When?
186
17. Is the Board responsible for issuing regulations
governing the licensing process, or is some other entity
responsible for that function?
a. What is that entity?
b. Has this policy changed since 1975? When?
18. How many full-time equivalent staff does this Board
have? This figure should reflect all staff, including
support staff, and should be based on a 40 hour work week.
Annual Staff (FTE)
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
19. How many full-time equivalent investigative staff does
this Board have?
Annual Investigating Staff (FTE)
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
20. Has this Board been included in sunset review
legislation?
a. Has it been reviewed?
1 . When was it reviewed?
2. What was the outcome of the review?
187
reviewed?
21• Is continuing education mandated of licensees?
22. If yes, what is the specific requirement?
23. When was this requirement changed since 1975?
24. What were the nature of the changes :
a. imposition of requirement
b. increase in number of hours
c. justification for course work
d. other (explain)
25. Do you have statistics on the number of complaints
received per year?
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
26. Do you have statistics on who files these complaints
(e.g., consumer, other licensees, etc.)?
Complaints by Complaints by Other
Consumers Other Licensees (Explain)
1975 _______________ _______________ ______
1976 _______________ _______________ ______
1977 _______________ _______________ ______
1978 _______________ _______________ ______
1979 _______________ _______________ ______
1980 _______________ _______________ ______
1981 _______________ _______________ ______
1982
188
1983
1984
27. Do you have information on the number of
investigations (of complaints) conducted since 1975?
1 975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
28. Do you have information on the number of complaint
files closed each year?
1975 -
1976 -
1977 -
1978 -
1979 -
1980 -
1981 -
1982 -
1983 -
1984 -
29. Does the Board disseminate a brochure to consumers to
explain the complaint process ? If yes, please attach a
copy of the brochure.
30. When did the Board start this practice?
31. How many of these brochures are distributed each year?
32. What are the categories of enforcement actions which
might be used in your state?
a. reprimand
b. probation
c. restriction of practice
d. revocation
e. other (explain)
33. Please send summary statistics on enforcement actions
189
taken by the state:
Reprimand Probation Revocation Restriction Other
1975 __________ __________ __________ ____________ ____
1976_____________ __________ __________ ____________ ____
1977 __________ __________ __________ ____________ ____
1978_____________ __________ __________ ____________ ____
1979 __________ __________ __________ ____________ ____
1980 __________ __________ __________ ____________ ____
1981 __________ __________ __________ ____________ ____
1982 __________ __________ __________ ____________ ____
1983 __________ __________ __________ ____________ ____
1984
34. Are disciplinary actions taken by the Board
publicized?
35. What methods are used to publicize disciplinary
actions?
a. general press release
b. notice in classified ads
c. press conference
d. publication in agency newsletter
e. other (explain)
36. How many lay/public members are on the licensing
board?
37. When were lay members added to the licensing board?
38. How many total members are on the licensing board?
39. When has this total changed since 1975?
40. How many terms of office can lay members serve?
41. What is the length of the standard term of office for
board members?
190
42. Of the present lay members on the board, how many have
served :
a. one term
b. two terms
c. three terms
d. other (explain)
43. Do members of the Board (particularly lay members)
receive any orientation or training with regard to their
respons ibilities ?
a. workshop
b. manual
c. meetings with past members
d. other (explain)
44. Do board members receive any financial compensation
for their services? Amount?
45. Are board members required to fill out public
disclosure statements? (Please attach a copy of each
member's form)
46. Do the disclosure statements include information on
the lay members' education level? If not, could you please
indicate the education background of the lay members.
0-8 years of education completed
9-12 years of education completed
12-15 years of education completed
16 years of education completed
Masters degree completed
Doctoral degree completed
47. Do the statements include income information? If not,
could you please indicate the income level of the lay
members ?
Annual income less than $10,000
Annual income between $10,000 and $15,000
Annual income between $15,000 and $25,000
Annual income between $25,000 and $50,000
Annual income between $50,000 and $100,000
Annual income greater than $100,000
48. Do the statements include occupational information?
If not, could you please indicate the occupation of the
public members?
191
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Asset Metadata
Creator
Nichol, Michael Bruce
(author)
Core Title
The effects of centralization and board membership reform on health occupational licensing policies
School
Graduate School
Degree
Doctor of Philosophy
Degree Program
Public Administration
Degree Conferral Date
1987-12
Tag
OAI-PMH Harvest
Permanent Link (DOI)
https://doi.org/10.25549/usctheses-oUC11256321
Unique identifier
UC11256321
Legacy Identifier
DP31191
Document Type
Dissertation