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Using Difference-in-Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic

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  • Martha A. Starr
  • R. Forrest McCluer

Abstract

In calculating damages in healthcare antitrust cases, the difference-in-difference (DID) approach provides a potentially valuable means of controlling for lawful factors that influence prices, such as case-mix and quality of care, as distinct from price differentials due to unlawful behavior. After first comparing DID to traditional methods of estimating damages, this paper uses DID to analyze data from a well-known case against Marshfield Clinic, a large multispecialty group practice that was found to have illegally allocated markets for physician services in Central Wisconsin. Using a specification similar to what was used in the case, we find that illegal behavior accounted for about two-fifths of the Clinic's extra increase in costs per patient during the damage period. The courts, however, were not persuaded that the analysis adequately controlled for legal factors. We discuss potential pitfalls in using DID to estimate damages suggested by the case, as well as possible ways around them.

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Bibliographic Info

Paper provided by American University, Department of Economics in its series Working Papers with number 2012-07.

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Date of creation: Feb 2012
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Handle: RePEc:amu:wpaper:2012-07

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Web page: http://www.american.edu/cas/economics/

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Keywords: healthcare antitrust; differences-in-differences; damage estimation JEL Classifications: I11; L4; K21; K41; C20;

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  1. Deborah Haas-Wilson & Christopher Garmon, 2011. "Hospital Mergers and Competitive Effects: Two Retrospective Analyses," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 17-32.
  2. Martin Gaynor & Robert J. Town, 2011. "Competition in Health Care Markets," NBER Working Papers 17208, National Bureau of Economic Research, Inc.
  3. Audrey Laporte & Frank Windmeijer, 2005. "Estimation of Panel Data Models with Binary Indicators when Treatment Effects are not Constant over Time," Working Papers laporte-04-01, University of Toronto, Department of Economics.
  4. Christopher Garmon & Deborah Haas-Wilson, 2011. "The Use of Multiple Control Groups and Data Sources as Validation in Retrospective Studies of Hospital Mergers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 41-44.
  5. Gaynor, Martin, 2006. "Is vertical integration anticompetitive?: Definitely maybe (but that's not final)," Journal of Health Economics, Elsevier, vol. 25(1), pages 175-180, January.
  6. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
  7. Imbens, Guido W. & Wooldridge, Jeffrey M., 2008. "Recent Developments in the Econometrics of Program Evaluation," IZA Discussion Papers 3640, Institute for the Study of Labor (IZA).
  8. Martha A. Starr & R. Forrest McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.
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Cited by:
  1. Martha A. Starr & R. Forrest McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.

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