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Can cost shifting continue in a price competitive environment?

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  • Jack Zwanziger
  • Glenn A. Melnick
  • Anil Bamezai

    (RAND Corporation, Santa Monica, CA, USA)

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    Abstract

    Both Medicare and Medicaid are reducing payments to hospitals, and there is widespread concern that hospitals may respond by increasing prices to privately insured patients. Theoretical models of hospital behaviour have ambiguous predictions as to whether, and under what circumstances, hospitals will shift costs to private payers. This paper extends previous theoretical models and then tests empirically using data from California for the 1983-1991 period, a time of increasingly intense price competition. Hospitals did increase their prices to private payers in response to reductions in Medicare rates; they had far smaller and generally insignificant responses to changes in Medicaid reimbursement. Hospital ownership and the competitiveness of the hospital market both affected this behaviour, but there was no significant change over time. The results suggest the need to broaden our models of hospital behaviour to 'embed' them in their local markets. Copyright © 2000 John Wiley & Sons, Ltd.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 9 (2000)
    Issue (Month): 3 ()
    Pages: 211-226

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    Handle: RePEc:wly:hlthec:v:9:y:2000:i:3:p:211-226

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Dranove, David, 1988. "Pricing by non-profit institutions : The case of hospital cost-shifting," Journal of Health Economics, Elsevier, Elsevier, vol. 7(1), pages 47-57, March.
    2. Zuckerman, Stephen, 1987. "Commercial insurers and all-payer regulation : Evidence on hospitals' responses to financial need," Journal of Health Economics, Elsevier, Elsevier, vol. 6(3), pages 165-187, September.
    3. Held, Philip J. & Pauly, Mark V., 1983. "Competition and efficiency in the end stage renal disease program," Journal of Health Economics, Elsevier, Elsevier, vol. 2(2), pages 95-118, August.
    4. Zwanziger, Jack & Melnick, Glenn A., 1988. "The effects of hospital competition and the Medicare PPS program on hospital cost behavior in California," Journal of Health Economics, Elsevier, Elsevier, vol. 7(4), pages 301-320, December.
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    Cited by:
    1. Daniel Friesner & Robert Rosenman, 2002. "A Dynamic Property Rights Theory of the Firm," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 9(3), pages 311-333.
    2. Vivian Wu, 2010. "Hospital cost shifting revisited: new evidence from the balanced budget act of 1997," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 10(1), pages 61-83, March.
    3. Rexford E. Santerre, 2005. "The welfare loss from hospital cost-shifting behavior: a partial equilibrium analysis," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(6), pages 621-626.
    4. Hart Hodges & Steven Henson, 2009. "Medical Reimbursements and Patient Selection by Physicians: A Capital-Theoretic Approach," Atlantic Economic Journal, International Atlantic Economic Society, International Atlantic Economic Society, vol. 37(4), pages 397-408, December.
    5. David Dranove & Craig Garthwaite & Christopher Ody, 2013. "How do Hospitals Respond to Negative Financial Shocks? The Impact of the 2008 Stock Market Crash," NBER Working Papers 18853, National Bureau of Economic Research, Inc.
    6. Robert Rosenman & Daniel Friesner & Christopher Stevens, 2005. "Do Health Care Providers Quality Discriminate? Empirical Evidence from Primary Care Outpatient Clinics," Eastern Economic Journal, Eastern Economic Association, vol. 31(4), pages 649-670, Fall.

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