Despite generous universal social health insurance with little formal restrictions of outpatient utilisation, Austria exhibits high rates of avoidable hospitalisations, which indicate the inefficient provision of primary healthcare and might be a consequence of the strict regulatory split between the Austrian inpatient and outpatient sector. This paper exploits the considerable regional variations in acute and chronic avoidable hospitalisations in Austria to investigate whether those inefficiencies in primary care are rather related to regional healthcare supply or to population characteristics. To explicitly account for inter-regional dependencies, spatial panel data methods are applied to a comprehensive administrative dataset of all hospitalisations from 2008 to 2013 in the 117 Austrian districts. The initial selection of relevant covariates is based on Bayesian model averaging. The results of the analysis show that supply-side variables, such as the number of general practitioners, are significantly associated with decreased chronic and acute avoidable hospitalisations, whereas characteristics of the regional population, such as the share of population with university education or long-term unemployed, are less relevant. Furthermore, the spatial error term indicates that there are significant spatial dependencies between unobserved characteristics, such as practice style or patients' utilization behaviour. Not accounting for those would result in omitted variable bias.
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