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Provider Selection, Bargaining, and Utilization Management in Managed Care


  • Richard C. Lindrooth

    (Center for Health Industry Market Economics, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208.)

  • Edward C. Norton

    (Health Policy and Administration, University of North Carolina at Chapel Hill, Chapel Hill, NC 27599.)

  • Barbara Dickey

    (Department of Psychiatry, Cambridge Hospital, Harvard Medical School, Cambridge, MA 02139.)


Managed care controls cost through a combination of provider selection, bargaining, and utilization management. Provider selection will reduce expenditures if patients are funneled to efficient providers. Bargaining will reduce expenditures through lower rates. Utilization management will reduce expenditures if providers reduce treatment intensity due to monitoring. We estimate that about 30% of the reduction in inpatient expenditures in a mental health carve-out was due to provider selection, 5% was due to bargaining, and the remaining 65% was due to utilization management. We find that both the provider selection and utilization management effects were likely to be welfare improving. Copyright 2002, Oxford University Press.

Suggested Citation

  • Richard C. Lindrooth & Edward C. Norton & Barbara Dickey, 2002. "Provider Selection, Bargaining, and Utilization Management in Managed Care," Economic Inquiry, Western Economic Association International, vol. 40(3), pages 348-365, July.
  • Handle: RePEc:oup:ecinqu:v:40:y:2002:i:3:p:348-365

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    Cited by:

    1. Leo Turcotte & John Robst & Solomon Polachek, 2006. "Medical interventions among pregnant women in fee-for-service and managed care insurance: a propensity score analysis," Applied Economics, Taylor & Francis Journals, vol. 38(13), pages 1513-1525.
    2. Atwood, Alicia & Lo Sasso, Anthony T., 2016. "The effect of narrow provider networks on health care use," Journal of Health Economics, Elsevier, vol. 50(C), pages 86-98.
    3. Nigam, Amit, 2012. "The effects of institutional change on geographic variation and health services use in the USA," Social Science & Medicine, Elsevier, vol. 74(3), pages 323-331.
    4. Hai Fang & John Rizzo, 2010. "Has the influence of managed care waned? Evidence from the market for physician services," International Journal of Health Economics and Management, Springer, vol. 10(1), pages 85-103, March.

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