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The Effect of Managed Care on Health Care Providers

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  • Laurence C. Baker
  • Martin L. Brown
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    Abstract

    We investigate the effect of managed care on the health care system, focusing on the effects managed care could have on the number and types of health care providers and their efficiency. By influencing providers, managed care may change the structure and performance of the entire health care system in ways that influence care provided to all patients. We begin by discussing the mechanisms by which managed care influences health care providers, concentrating on shifts in market demand and increases in the amount of attention paid to price in provider choices. We develop a theoretical framework that illustrates these effects. We then empirically examine the relationship between managed care activity and mammography providers. We find evidence that increases in HMO activity are associated with changes in the number of providers, the volume of services produced by each provider, and the prices they charge. This evidence is consistent with the view that HMOs can have broad effects on health care providers.

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    File URL: http://www.nber.org/papers/w5987.pdf
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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5987.

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    Date of creation: Apr 1997
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    Publication status: published as RAND Journal of Economics, Vol. 30, no. 2 (Summer 1999): 351-374.
    Handle: RePEc:nbr:nberwo:5987

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    1. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers, Board of Governors of the Federal Reserve System (U.S.) 94, Board of Governors of the Federal Reserve System (U.S.).
    2. Katz, Michael L, 1984. "Price Discrimination and Monopolistic Competition," Econometrica, Econometric Society, Econometric Society, vol. 52(6), pages 1453-71, November.
    3. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, Elsevier, vol. 16(4), pages 453-481, August.
    4. Feldman, Roger & Dowd, Bryan, 1986. "Is there a competitive market for hospital services?," Journal of Health Economics, Elsevier, Elsevier, vol. 5(3), pages 277-292, September.
    5. Charles E. Phelps, 1992. "Diffusion of Information in Medical Care," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(3), pages 23-42, Summer.
    6. Baker, Laurence C & Corts, Kenneth S, 1996. "HMO Penetration and the Cost of Health Care: Market Discipline or Market Segmentation?," American Economic Review, American Economic Association, American Economic Association, vol. 86(2), pages 389-94, May.
    7. Laurence C. Baker & Kenneth S. Corts, 1995. "The Effects of HMOs on Conventional Insurance Premiums: Theory and Evidence," NBER Working Papers 5356, National Bureau of Economic Research, Inc.
    8. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, Elsevier, vol. 29(3), pages 229-256, September.
    9. Noether, Monica, 1988. "Competition among hospitals," Journal of Health Economics, Elsevier, Elsevier, vol. 7(3), pages 259-284, September.
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    Cited by:
    1. Mas, Nuria & Seinfeld, Janice, 2004. "Is managed care restraining the adoption of technology by hospitals?," IESE Research Papers, IESE Business School D/554, IESE Business School.
    2. Bokhari, Farasat A.S., 2009. "Managed care competition and the adoption of hospital technology: The case of cardiac catheterization," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 27(2), pages 223-237, March.
    3. Mas, Nuria, 2005. "Managed care and the safety net: More pain for the uninsured?," IESE Research Papers, IESE Business School D/596, IESE Business School.
    4. David M. Cutler & Louise Sheiner, 1999. "The geography of Medicare," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1999-18, Board of Governors of the Federal Reserve System (U.S.).
    5. Richard Arnould & Marianne Bertrand & Kevin F. Hallock, 2000. "Does Managed Care Change the Mission of Nonprofit Hospitals? Evidence From the Managerial Labor Market," NBER Working Papers 7924, National Bureau of Economic Research, Inc.

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