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Hospital Choices, Hospital Prices and Financial Incentives to Physicians

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Listed author(s):
  • Kate Ho
  • Ariel Pakes

Abstract

We estimate an insurer-specific preference function which rationalizes hospital referrals for privately-insured births in California. The function is additively separable in: a hospital price paid by the insurer, the distance traveled, and plan and severity-specific hospital fixed effects (capturing hospital quality). We use an inequality estimator that allows for errors in price and detailed hospital-severity interactions and obtain markedly different results than those from a logit. The estimates indicate that insurers with more capitated physicians are more responsive to price. Capitated plans send patients further to utilize similar-quality lower-priced hospitals; but the cost-quality trade-off does not vary with capitation rates.

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File URL: http://www.nber.org/papers/w19333.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19333.

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Date of creation: Aug 2013
Publication status: published as Ho, Kate, and Ariel Pakes. 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians." American Economic Review, 104(12): 3841-84.
Handle: RePEc:nbr:nberwo:19333
Note: HC IO
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Find related papers by JEL classification:
  • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
  • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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  1. Burns, Lawton R. & Wholey, Douglas R., 1992. "The impact of physician characteristics in conditional choice models for hospital care," Journal of Health Economics, Elsevier, vol. 11(1), pages 43-62, May.
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  4. Mark McClellan, 2011. "Reforming Payments to Healthcare Providers: The Key to Slowing Healthcare Cost Growth While Improving Quality?," Journal of Economic Perspectives, American Economic Association, vol. 25(2), pages 69-92, Spring.
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  6. A. Pakes & J. Porter & Kate Ho & Joy Ishii, 2015. "Moment Inequalities and Their Application," Econometrica, Econometric Society, vol. 83, pages 315-334, 01.
  7. A. Pakes, 2010. "Alternative Models for Moment Inequalities," Econometrica, Econometric Society, vol. 78(6), pages 1783-1822, November.
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  9. Mark G. Duggan, 2000. "Hospital Ownership and Public Medical Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1343-1373.
  10. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-763, Winter.
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  12. Ho, Katherine & Pakes, Ariel, 2011. "Do physician incentives affect hospital choice? A progress report," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 317-322, May.
  13. Dana Goldman & John A. Romley, 2008. "Hospitals As Hotels: The Role of Patient Amenities in Hospital Demand," NBER Working Papers 14619, National Bureau of Economic Research, Inc.
  14. Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079.
  15. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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  17. Alan T. Sorensen, 2003. "Insurer-hospital bargaining: negotiated discounts in post-deregulation connecticut," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 469-490, December.
  18. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
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Cited by:

  1. Ho, Katherine & Rosen, Adam M., 2015. "Partial Identification in Applied Research: Benefits and Challenges," CEPR Discussion Papers 10883, C.E.P.R. Discussion Papers.
  2. Eduardo Morales & Gloria Sheu & Andrés Zahler, 2014. "Gravity and Extended Gravity: Using Moment Inequalities to Estimate a Model of Export Entry," NBER Working Papers 19916, National Bureau of Economic Research, Inc.
  3. Tianyan Hu & Sandra L. Decker & Shin-Yi Chou, 2014. "The Impact of Health Insurance Expansion on Physician Treatment Choice: Medicare Part D and Physician Prescribing," NBER Working Papers 20708, National Bureau of Economic Research, Inc.
  4. Gloria Sheu & Andres Zahler & Eduardo Morales, 2016. "Extended Gravity," 2016 Meeting Papers 1565, Society for Economic Dynamics.
  5. Victor Chernozhukov & Whitney K. Newey & Andres Santos, 2015. "Constrained conditional moment restriction models," CeMMAP working papers CWP59/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  6. Baker, Laurence C. & Bundorf, M. Kate & Kessler, Daniel P., 2016. "The effect of hospital/physician integration on hospital choice," Journal of Health Economics, Elsevier, vol. 50(C), pages 1-8.
  7. Carrie Colla & Julie Bynum & Andrea Austin & Jonathan Skinner, 2016. "Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population," NBER Working Papers 22826, National Bureau of Economic Research, Inc.
  8. 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.
  9. Mark Shepard, 2016. "Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange," NBER Working Papers 22600, National Bureau of Economic Research, Inc.
  10. Paul J. Eliason & Paul L. E. Grieco & Ryan C. McDevitt & James W. Roberts, 2016. "Strategic Patient Discharge: The Case of Long-Term Care Hospitals," NBER Working Papers 22598, National Bureau of Economic Research, Inc.

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