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Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior

  • Michael Chernew
  • Gautam Gowrisankaran
  • A. Mark Fendrick
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    In this paper we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.

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    File URL: http://www.nber.org/papers/w8632.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8632.

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    Date of creation: Dec 2001
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    Publication status: published as Chernew, Michael, Gautam Gowrisankaran and A. Mark Fendrick. "Payer Type And The Returns To Bypass Surgery: Evidence From Hospital Entry Behavior," Journal of Health Economics, 2002, v21(3,May), 451-474.
    Handle: RePEc:nbr:nberwo:8632
    Note: HC
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
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    1. Geweke, John, 1989. "Bayesian Inference in Econometric Models Using Monte Carlo Integration," Econometrica, Econometric Society, vol. 57(6), pages 1317-39, November.
    2. Garnick, Deborah W. & Lichtenberg, Erik & Phibbs, Ciaran S. & Luft, Harold S. & Peltzman, Deborah J. & McPhee, Stephen J., 1990. "The sensitivity of conditional choice models for hospital care to estimation technique," Journal of Health Economics, Elsevier, vol. 8(4), pages 377-397, February.
    3. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
    4. Vassilis A. Hajivassiliou & Daniel L. McFadden & Paul Ruud, 1993. "Simulation of Multivariate Normal Rectangle Probabilities and their Derivatives: Theoretical and Computational Results," Working Papers _024, Yale University.
    5. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer.
    6. McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
    7. David M. Cutler & Mark McClellan, 1996. "The Determinants of Technological Change in Heart Attack Treatment," NBER Working Papers 5751, National Bureau of Economic Research, Inc.
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