Is the impact of managed care on hospital prices decreasing?

David Dranove*, Richard Lindrooth, William D. White, Jack Zwanziger

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

28 Scopus citations


Prior studies find that the growth of managed care through the early 1990s introduced a strong positive relationship between price and concentration in hospital markets. We hypothesize that the relaxation of constraints on consumer choice in response to a "managed care backlash" has diminished the price sensitivity of demand facing hospitals, reducing or possibly reversing the price-concentration relationship. We test this hypothesis by studying the price/concentration relationship for hospitals in California and Florida for selected years between 1990 and 2003, while addressing the potential endogeneity of concentration. We find an increasingly positive price/concentration in the 1990s with a peak occurring by 2001. Between 2001 and 2003, the growth in this relationship halts and possibly reverses.

Original languageEnglish (US)
Pages (from-to)362-376
Number of pages15
JournalJournal of Health Economics
Issue number2
StatePublished - Mar 2008


  • Competition
  • Hospitals
  • Managed care

ASJC Scopus subject areas

  • Public Health, Environmental and Occupational Health
  • Health Policy


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