The effect of injecting price competition into the hospital market: The case of preferred provider organizations

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

Preferred provider organizations (PPOs) and other discount health care purchasers are injecting price competition into the hospital market, which has hitherto been insulated from price competition by comprehensive and generous insurance coverage. Providing the discounts demanded by PPOs thus poses unaccustomed and difficult problems for hospitals. We constructed a model to study the choices forced by PPOs on the hospital market. We predict that prices will fall, excess capacity will be reduced, and some hospitals may develop financial problems. In the extreme case, prices will fall substantially, some hospitals will go bankrupt, excess capacity will be eliminated, and an unprecedented price volatility will be introduced into the market.

Original languageEnglish (US)
Pages (from-to)419-431
Number of pages13
JournalInquiry
Volume23
Issue number4
StatePublished - Dec 1 1986

ASJC Scopus subject areas

  • Health Policy

Fingerprint Dive into the research topics of 'The effect of injecting price competition into the hospital market: The case of preferred provider organizations'. Together they form a unique fingerprint.

Cite this