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Is the impact of managed care on hospital prices decreasing?

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  • Dranove, David
  • Lindrooth, Richard
  • White, William D.
  • Zwanziger, Jack

Abstract

Prior studies find that the growth of managed care through the early 1990s introduced a strong positive relationship between price and concentration in hospital markets. We hypothesize that the relaxation of constraints on consumer choice in response to a "managed care backlash" has diminished the price sensitivity of demand facing hospitals, reducing or possibly reversing the price-concentration relationship. We test this hypothesis by studying the price/concentration relationship for hospitals in California and Florida for selected years between 1990 and 2003, while addressing the potential endogeneity of concentration. We find an increasingly positive price/concentration in the 1990s with a peak occurring by 2001. Between 2001 and 2003, the growth in this relationship halts and possibly reverses.

Suggested Citation

  • Dranove, David & Lindrooth, Richard & White, William D. & Zwanziger, Jack, 2008. "Is the impact of managed care on hospital prices decreasing?," Journal of Health Economics, Elsevier, vol. 27(2), pages 362-376, March.
  • Handle: RePEc:eee:jhecon:v:27:y:2008:i:2:p:362-376
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    Cited by:

    1. Eila Kankaanpää & Ismo Linnosmaa & Hannu Valtonen, 2011. "Public health care providers and market competition: the case of Finnish occupational health services," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(1), pages 3-16, February.
    2. Abe Dunn & Adam Hale Shapiro, 2011. "Physician Market Power and Medical-Care Expenditures," BEA Working Papers 0078, Bureau of Economic Analysis.
    3. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    4. Brunt, Christopher S. & Bowblis, John R., 2014. "Health insurer market power and primary care consolidation," Economics Letters, Elsevier, vol. 125(1), pages 61-65.
    5. Y. J. F. M. Krabbe-Alkemade & T. L. C. M. Groot & M. Lindeboom, 2017. "Competition in the Dutch hospital sector: an analysis of health care volume and cost," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 139-153, March.
    6. Abe Dunn & Adam Hale Shapiro, 2014. "Do Physicians Possess Market Power?," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 159-193.

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