The formation and evolution of physician treatment styles: an application to cesarean sections.

Small-area-variation studies have shown that physician treatment styles differ substantially both between and within markets, controlling for patient characteristics. Using data on the universe of deliveries in Florida and New York over a 15-year period, we examine why treatment styles differ across obstetricians at a point in time and why styles change over time. We find that variation in c-section rates across physicians within a market is about twice as large as variation between markets. Surprisingly, residency programs explain no more than four percent of the variation in physicians' risk-adjusted c-section rates, even among newly trained physicians. Although we find evidence that physicians learn from their peers, they do not substantially revise their prior beliefs regarding treatment due to the local exchange of information. Our results indicate that physicians are not likely to converge over time to a community standard; thus, within-market variation in treatment styles is likely to persist.