Is the impact of managed care on hospital prices decreasing?

David Dranove; Richard Lindrooth; William D. White; Jack Zwanziger

doi:10.1016/j.jhealeco.2007.05.004

Is the impact of managed care on hospital prices decreasing?

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

^*Corresponding author for this work

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Research output: Contribution to journal › Article › peer-review

24 Scopus citations

Abstract

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 language	English (US)
Pages (from-to)	362-376
Number of pages	15
Journal	Journal of Health Economics
Volume	27
Issue number	2
DOIs	https://doi.org/10.1016/j.jhealeco.2007.05.004
State	Published - Mar 2008

Keywords

Competition
Hospitals
Managed care

ASJC Scopus subject areas

Health Policy
Public Health, Environmental and Occupational Health

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.jhealeco.2007.05.004

Cite this

@article{31a1be56f4074ba0bfad4b55066403b1,

title = "Is the impact of managed care on hospital prices decreasing?",

abstract = "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.",

keywords = "Competition, Hospitals, Managed care",

author = "David Dranove and Richard Lindrooth and White, {William D.} and Jack Zwanziger",

note = "Funding Information: This research has been supported by Grant No. 051830 from the Robert Wood Johnson Foundation Changes in Health Care Financing and Organization (HCFO) Initiative. We would like to thank Kristin Madison and Sujoy Chakravarty for providing data on hospital system membership. We would also like to thank two anonymous referees and participants at presentations at meetings of the American Economics Association and the American Society of Health Economists for comments. ",

year = "2008",

month = mar,

doi = "10.1016/j.jhealeco.2007.05.004",

language = "English (US)",

volume = "27",

pages = "362--376",

journal = "Journal of Health Economics",

issn = "0167-6296",