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

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  • Martha A. Starr
  • R. Forrest McCluer

Abstract

In calculating damages in healthcare antitrust cases, the difference-in-difference (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 first 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 multispecialty 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 two-fifths 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

  • Martha A. Starr & R. Forrest McCluer, 2012. "Using Difference-in-Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic," Working Papers 2012-07, American University, Department of Economics.
    • Handle: RePEc:amu:wpaper:2012-07
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    References listed on IDEAS

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    1. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    2. Christopher Garmon & Deborah Haas-Wilson, 2011. "The Use of Multiple Control Groups and Data Sources as Validation in Retrospective Studies of Hospital Mergers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 41-44.
    3. 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.
    4. 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.
    5. Gaynor, Martin, 2006. "Is vertical integration anticompetitive?: Definitely maybe (but that's not final)," Journal of Health Economics, Elsevier, vol. 25(1), pages 175-180, January.
    6. 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.
    7. Martha A. Starr & R. Forrest McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.
    8. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769, October.
    9. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, October.
    10. 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.
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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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    Keywords

    healthcare antitrust; differences-in-differences; damage estimation JEL Classifications: I11; L4; K21; K41; C20;

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