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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.

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  • 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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    1. Martha A. Starr & Forrest R. McCluer, 2014. "Prices and Quantities in Health Care Antitrust Damages," Working Papers 2014-03, American University, Department of Economics.

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    More about this item

    Keywords

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

    JEL classification:

    • I - Health, Education, and Welfare

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