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Does Competition from HMOs Affect Fee-For-Service Physicians?

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  • Laurence C. Baker

Abstract

This paper develops county-level estimates of HMO market share for all counties in the United States and uses them to examine the relationship between HMO market share and the fee for a normal office visit with an established patient charged by 2,845 fee-for-service (FFS) physicians. Two-stage least squares estimates indicate that increases of 10 percentage points in HMO market share are associated with decreases of approximately 11 percent in the normal office visit fee. However, further examination indicates that the incomes of the physicians in the sample are not lower in areas with higher HMO market share. In addition, the quantity of services provided, measured by the number of hours worked and the number of patients seen per week, is not higher in these areas. While it is possible that physicians induce demand to change the volume or mix of services provided to patients in ways that do not affect the number of hours worked or patients seen, another hypothesis consistent with these findings is that FFS physicians respond to competition from HMOs by adopting multi-part pricing strategies in which the price for an office visit is reduced but prices for other services are raised.

Suggested Citation

  • Laurence C. Baker, 1994. "Does Competition from HMOs Affect Fee-For-Service Physicians?," NBER Working Papers 4920, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:4920
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    References listed on IDEAS

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    Cited by:

    1. Alicia Sasser Modestino, 2013. "The impact of managed care on the gender earnings gap among physicians," Working Papers 13-1, Federal Reserve Bank of Boston.
    2. Núria Mas, 2013. "Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care," International Journal of Health Economics and Management, Springer, vol. 13(2), pages 95-114, June.
    3. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
    4. Laurence C. Baker & Sharmila Shankarkumar, 1998. "Managed Care and Health Care Expenditures: Evidence from Medicare, 1990—1994," NBER Chapters, in: Frontiers in Health Policy Research, Volume 1, pages 117-152, National Bureau of Economic Research, Inc.
    5. Laurence C. Baker & Sharmila Shankarkumar, 1997. "Managed Care and Health Care Expenditures: Evidence From Medicare," NBER Working Papers 6187, National Bureau of Economic Research, Inc.
    6. William N. Evans & Helen Levy & Kosali I. Simon, 2000. "Data Watch: Research Data in Health Economics," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 203-216, Fall.
    7. 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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    JEL classification:

    • I1 - Health, Education, and Welfare - - Health
    • L8 - Industrial Organization - - Industry Studies: Services

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