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Using Difference in Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic

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  • R. Forrest McCluer
  • Martha A. Starr

Abstract

In calculating damages in healthcare antitrust cases, the difference-in-differences (DID) approach provides a potentially valuable means of controlling for lawful factors that influence prices, such as case mix and quality of care, as distinct from price differentials due to unlawful behavior. After comparing DID to traditional methods of estimating damages, this paper uses DID to analyze data from a well-known case against Marshfield Clinic, a large multi-specialty group practice that was found to have illegally allocated markets for physician services in Central Wisconsin. Using a specification similar to what was used in the case, we find that illegal behavior accounted for about one-half of the Clinic's extra increase in costs per patient during the damage period. The courts, however, were not persuaded that the analysis adequately controlled for legal factors. We discuss potential pitfalls in using DID to estimate damages suggested by the case, as well as possible ways around them .

Suggested Citation

  • R. Forrest McCluer & Martha A. Starr, 2013. "Using Difference in Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 20(3), pages 447-469, November.
  • Handle: RePEc:taf:ijecbs:v:20:y:2013:i:3:p:447-469
    DOI: 10.1080/13571516.2013.800323
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    References listed on IDEAS

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    1. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
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    7. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    8. Martha A. Starr & R. Forrest McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.
    9. Laporte, Audrey & Windmeijer, Frank, 2005. "Estimation of panel data models with binary indicators when treatment effects are not constant over time," Economics Letters, Elsevier, vol. 88(3), pages 389-396, September.
    10. Deborah Haas-Wilson & Christopher Garmon, 2011. "Hospital Mergers and Competitive Effects: Two Retrospective Analyses," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 17-32.
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    1. Martha A. Starr & R. Forrest McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.

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