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Hospital Choices, Hospital Prices and Financial Incentives to Physicians

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  • Kate Ho
  • Ariel Pakes

Abstract

We estimate an insurer-specific preference function which rationalizes hospital referrals for privately-insured births in California. The function is additively separable in: a hospital price paid by the insurer, the distance traveled, and plan and severity-specific hospital fixed effects (capturing hospital quality). We use an inequality estimator that allows for errors in price and detailed hospital-severity interactions and obtain markedly different results than those from a logit. The estimates indicate that insurers with more capitated physicians are more responsive to price. Capitated plans send patients further to utilize similar-quality lower-priced hospitals; but the cost-quality trade-off does not vary with capitation rates.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19333.

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Date of creation: Aug 2013
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Publication status: forthcoming in the American Economic Review.
Handle: RePEc:nbr:nberwo:19333

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  1. Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079.
  2. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 577-615, May.
  3. Ariel Pakes & J. Porter & Kate Ho & Joy Ishii, 2007. "Moment inequalities and their application," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP16/07, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  4. Martin Gaynor & William B. Vogt, 2003. "Competition Among Hospitals," NBER Working Papers, National Bureau of Economic Research, Inc 9471, National Bureau of Economic Research, Inc.
  5. Alan T. Sorensen, 2003. "Insurer-hospital bargaining: negotiated discounts in post-deregulation connecticut," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 51(4), pages 469-490, December.
  6. Ho, Katherine & Pakes, Ariel, 2011. "Do physician incentives affect hospital choice? A progress report," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 29(3), pages 317-322, May.
  7. Ariel Pakes, 2010. "Alternative models for moment inequalities," CeMMAP working papers, Centre for Microdata Methods and Practice, Institute for Fiscal Studies CWP21/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  8. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles, Harvard University Department of Economics 2643884, Harvard University Department of Economics.
  9. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers, National Bureau of Economic Research, Inc 7789, National Bureau of Economic Research, Inc.
  10. Patrick Bajari & Han Hong & Minjung Park & Robert Town, 2011. "Regression Discontinuity Designs with an Endogenous Forcing Variable and an Application to Contracting in Health Care," NBER Working Papers, National Bureau of Economic Research, Inc 17643, National Bureau of Economic Research, Inc.
  11. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 34(4), pages 737-63, Winter.
  12. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, American Economic Association, vol. 84(4), pages 772-93, September.
  13. Burns, Lawton R. & Wholey, Douglas R., 1992. "The impact of physician characteristics in conditional choice models for hospital care," Journal of Health Economics, Elsevier, Elsevier, vol. 11(1), pages 43-62, May.
  14. Dana Goldman & John A. Romley, 2008. "Hospitals As Hotels: The Role of Patient Amenities in Hospital Demand," NBER Working Papers, National Bureau of Economic Research, Inc 14619, National Bureau of Economic Research, Inc.
  15. Mark McClellan, 2011. "Reforming Payments to Healthcare Providers: The Key to Slowing Healthcare Cost Growth While Improving Quality?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 25(2), pages 69-92, Spring.
  16. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
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Cited by:
  1. Eduardo Morales & Gloria Sheu & Andrés Zahler, 2014. "Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry," NBER Working Papers, National Bureau of Economic Research, Inc 19916, National Bureau of Economic Research, Inc.

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