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Do hospitals respond to decreasing prices by supplying more services?

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  • Salm, M.;
  • Wübker, A.;

Abstract

Regulated prices are common in markets for medical care. We estimate the effect of changes in regulated reimbursement prices on volume of hospital care based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement – with increasing prices for some hospitals and decreasing prices for others – without affecting the relative prices for different groups of patients or types of treatment. Based on administrative data, we find that hospitals react to decreasing prices by supplying more services. We interpret our findings as evidence for a negative income effect of lower prices on higher volume of care.

Suggested Citation

  • Salm, M.; & Wübker, A.;, 2018. "Do hospitals respond to decreasing prices by supplying more services?," Health, Econometrics and Data Group (HEDG) Working Papers 18/25, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:18/25
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    References listed on IDEAS

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    1. Jurgita Januleviciute & Jan Erik Askildsen & Oddvar Kaarboe & Luigi Siciliani & Matt Sutton, 2016. "How do Hospitals Respond to Price Changes? Evidence from Norway," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 620-636, May.
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    3. Yip, Winnie C., 1998. "Physician response to Medicare fee reductions: changes in the volume of coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors," Journal of Health Economics, Elsevier, vol. 17(6), pages 675-699, December.
    4. Pilny, Adam, 2014. "Mergers and Acquisitions in the German Hospital Market – Who are the Targets?," Ruhr Economic Papers 518, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    5. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    6. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    7. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
    8. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
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    11. He, Daifeng & Mellor, Jennifer M., 2012. "Hospital volume responses to Medicare's Outpatient Prospective Payment System: Evidence from Florida," Journal of Health Economics, Elsevier, vol. 31(5), pages 730-743.
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    More about this item

    Keywords

    government expenditures and health; hospital care; procurement;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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