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Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior

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  • Michael Chernew
  • Gautam Gowrisankaran
  • A. Mark Fendrick

Abstract

In this paper we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.

Suggested Citation

  • Michael Chernew & Gautam Gowrisankaran & A. Mark Fendrick, 2001. "Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior," NBER Working Papers 8632, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8632
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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