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Hospital Choices, Hospital Prices and Financial Incentives to Physicians

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  • 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.

Suggested Citation

  • Kate Ho & Ariel Pakes, 2013. "Hospital Choices, Hospital Prices and Financial Incentives to Physicians," NBER Working Papers 19333, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19333
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    More about this item

    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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