hospital choices hospital prices and financial incentives to physicians we estimate an insurer speci c preference function which rationalizes hospital referrals for privately insured births in california the function is additively separable in a hospital price paid by the insurer the distance traveled and plan and severity speci c hospital xed eects capturing hospital quality we use an inequality estimator that allows for errors in price and detailed hospital severity interactions and obtain markedly dierent results than those from a logit the estimates indicate that insurers with more capitated physicians are more responsive to price capitated plans send patients further to utilize similar quality lower priced hospitals but the cost quality trade odoes not vary with capitation rates the patient protection and aordable care act of 2010 includes provisions to establish ac countable care organizations acos in the medicare program these are groups of health care providers that oer services to a large number of patients and are eligible to share in any cost savings they achieve for the medicare program 1 private sector acos are forming in parallel to this initiative often with very similar structures and payment arrangements the proportion of savings acos keep is linked to their performance on quality standards the goal of the initiative is to reduce health care costs in both medicare and private insurance and to improve coordination of care the tying of cost savings to quality standards is designed to mitigate the concern that an increase in incentives to control costs might lead to a decrease in the quality of care the health policy literature has noted that similar cost control incentives are currently utilized by some health maintenance organizations hmos in california and elsewhere 2 in this paper we investigate the impact of these incentives on the cost and quality of care provided to patients focusing in particular on the choice of hospital for privately insured patients giving birth we use

information advantage in cournot oligopoly abstract consider an oligopolistic industry where firms have access to the same technology but are asymmetrically informed about the environment even though it is commonplace to think that in this context superior information leads to higher profits we find that under cournot competition this is not generally the case it holds when firms technology exhibits constant returns to scale but it does not necessarily hold otherwise journal of economic literature classification numbers c72 d43 l13

hospital transaction prices and managed care discounting for selected medical technologies it is generally assumed that managed care has been successful at capturing discounts from medical providers but the implications have been a matter of debate critics argue that managed care organizations attain savings by reducing intensity of services while others have argued that savings are real and are a consequence of discounts per unit of care rather than reduced intensity because medical services tend to be bundled together into episodes of care separating out prices and quantities can be difficult given available data past studies focused on an average price for the aggregate hospital calculated from total revenue divided by the number of inpatient days or cases e g glenn a melnick et al 1992 emmett b keeler and melnick 1999 david dranove and richard ludwick 1999 caution that these methods provide approximations of actual prices and are subject to measurement error due to unobservable differences in service mix examining treatment episode for acute myocardial infarctions heart attacks david cutler et al 2000 infer that discounts attained by managedcare plans are only partly due to reductions in intensity here we employ data that enable us to observe transaction prices i e actual payments borne by the payer and received by the hospital for major procedures on an unbundled basis our analysis differs from previous studies in several important dimensions among these is the focus on pricing differences between various insurers and employers rather than differences within a single large insurer as a consequence we derive an empirical specification based on the bargaining framework due to john m brooks et al 1997 rather than their insurerbased model moreover to identify pure unit discounts we focus on the narrowly defined procedure like cutler et al we focus on coronary heart disease a leading cause of death we examine a major procedure used to treat this disease one that is costly and relatively common in bypass surgery more fully coronary arterial bypass graft or cabg healthy segments of artery are surgically inserted around the diseased arteries in 2002 about 344 000 cabg s were performed in the united states with expenditures exceeding 21 billion other economists have focused on these procedures to examine market phenomena such as the hospital s entry decision michael chernew et al 2002 or information diffusion dranove et al 2003 yet the pricing decision was not treated fully

the supply of charity services by nonprofit hospitals motives and market structure this article studies provision of charity care by private nonprofit hospitals we demonstrate that in the absence of large positive income effects on charity care supply convex preferences for the nonprofit hospital imply crowding out by other private or government hospitals extending our model to include impure altruism rivalry provides a possible explanation for the previously reported empirical result that both crowding out and income effects on indigent care supply are often weak or insignificant empirical analysis of data for hospitals in maryland provides evidence of rivalry on the supply of charity care

cut to the bone hospital takeovers and nurse employment contracts the authors examine changes in the wages employment and effort of nurses in california hospitals following takeovers by large chains in the 1990s the market for nurses has been described as a classic monopsony so that one might expect increases in firm market power to be associated with declines in wages however a basic contracting model predicts effects on effort rather than on wages which is what this analysis finds nurses experienced few declines in wages following takeovers but did see increases in the number of patients per nurse the measure of effort used here the authors show that their results are also consistent with an extended version of the monopsony model that considers effort and allows for revenue shifts following a takeover finally they find that these changes were similar in the largest for profit and non profit chains suggesting that market forces are more important than institutional form

hospital systems and bargaining power evidence from out of market acquisitions competition analyses generally restrict their attention to how mergers alter concentration in the relevant consumer market studying hospital competition by focusing on the local patient market may be misleading however as multi market hospital systems often play an important role in the price negotiations of their members with managed care organizations we focus on out of market hospital mergers to investigate the cross market effects of system membership on member hospital reimbursement rates based on acquisitions occurring across the united states during 2000 2008 we find that hospitals exhibit significant increases of around 14 in their net reimbursement rates after becoming affiliated with an out of market system compared to independent stand alone hospitals we find no evidence that the price effect results from changes in patient case mix the cost of providing care generally or hospital quality the findings reveal that systems can impact the market power of hospitals in ways that have not been considered in recent antitrust analysis

insurer hospital bargaining negotiated discounts in post deregulation connecticut this paper uses unique data from the state of connecticut to examine discounting patterns in the state s hospital industry for the years following deregulation 1995 1998 the data provide a rare opportunity to study payer level differences in negotiated discounts for hospital services in addition to presenting descriptive evidence on how discounts vary across payers payer types and hospital types this study uses matched revenue data to analyze the economic determinants of discount magnitudes payer size appears to affect bargaining power but the economic significance of the effect is small the data exhibit patterns consistent with a bargaining explanation in which discount magnitudes depend critically on payers abilities to channel patients to hospitals with which favorable discounts have been negotiated

external demand constraints for agricultural exports an impediment to structural adjustment policies in sub saharan african countries abstract structural adjustment programmes are being promoted throughout the developing countries the recommended policy package including price as well as non price policies is geared towards export growth and a long term sustainable balance of payments there is considerable scepticism however whether developing countries can indeed benefit from an export oriented growth strategy first rigidities in domestic output supply responses could preclude significant export growth second external demand side constraints could impede export revenue growth if a jointly promoted export led strategy resulted in world market price deterioration analysis reveals that in the case of sub saharan africa neither of the above factors should cause a failure of structural adjustment policies however the outcome of adjustment policies could be improved if commodity and country specific factors were taken into consideration

an evaluation of medicaid selective contracting in california this study used 1982 1986 data on 262 private community hospitals to evaluate the effects of selective contracting for inpatient services by california s medicaid program selective contracting by medicaid significantly reduced the rate of inflation in average costs per admission and per patient day while slightly increasing average lengths of patient stays private sector contracting also reduced cost inflation rates significantly and caused small non significant reductions in lengths of stays hospital savings in 1986 due to medicaid selective contracting were 836 million 7 6 of what hospital expenditures would have been in the absence of contracting

communication in cournot oligopoly abstract this paper studies communication in a static cournot duopoly model under the assumption that the firms have unverifiable private information about their costs we investigate the conditions under which the firms cannot transmit any information through cheap talk and show that when these conditions are violated it may be possible to construct informative cheap talk equilibria if the firms can communicate through a third party communication can be informative even when informative cheap talk is impossible we exhibit a simple mediated mechanism that ensures informative communication and interim pareto dominates the uninformative equilibrium for the firms

improving nash by coarse correlation we consider a class of symmetric two person quadratic games where coarse correlated equilibria cce moulin and vial 1978 can strictly improve upon the nash equilibrium payoffs while correlated equilibrium ce aumann 1974 1987 cannot because these games are potential games with concave potential functions we compute the largest feasible total utility in any cce in those games and show that it is achieved by a cce involving only two pure strategy profiles applications include the cournot duopoly and the game of public good provision where the improvement over and above the nash equilibrium payoff can be substantial

how do hospitals respond to price changes this paper examines hospital responses to changes in diagnosis specific prices by exploiting a 1988 policy reform that generated large price changes for 43 percent of medicare admissions i find hospitals responded primarily by upcoding patients to diagnosis codes with the largest price increases this response was particularly strong among for profit hospitals i find little evidence hospitals increased the volume of admissions differentially for diagnoses subject to the largest price increases despite the financial incentive to do so neither did they increase intensity or quality of care in these diagnoses suggesting hospitals do not compete for patients at the diagnosis level

the impact of hospital market structure on patient volume average length of stay and the cost of care a variety of recent proposals rely heavily on market forces as a means of controlling hospital cost inflation sceptics argue however that increased competition might lead to cost increasing acquisitions of specialized clinical services and other forms of non price competition as means of attracting physicians and patients using data from hospitals in 1972 we analyzed the impact of market structure on average hospital costs measured in terms of both cost per patient and cost per patient day under the retrospective reimbursement system in place at the time hospitals in more competitive environments exhibited significantly higher costs of production than did those in less competitive environments

nonprofit hospital mergers and the exercise of market power government challenges to mergers within the hospital industry have become more frequent many of those mergers involve nonprofit organizations rather than the for profit firms that are the norm in most other industries this difference in ownership has made no apparent difference in the antitrust agencies approach to proposed hospital mergers in this article i test the proposition that nonprofit and for profit hospitals price differently in response to the structure of the markets in which they compete based on a cross sectional analysis of california hospitals i find that estimated merger effects on hospital prices do vary by type of ownership in response to either higher market share or to the joint combination of higher share and higher market concentration private nonprofit hospital prices are statistically significantly lower than for profit hospital prices and on balance in this sample there is no evidence of any systematic price increasing effect on private nonprofit hospitals

hospital competition spillovers and provision of uncompensated care using data for california from 2005 until 2010 we investigate to what extent market competition and the presence of non profits in the area may play a role in equilibrium uncompensated care uc l

lessons learned in structural adjustment lending in the developing world and implications for eastern europe discussion conditional program assistance which has come to be designated as structural adjustment sa was and still is the order of the day in many countries in africa and elsewhere tweeten mosley and toye also from both methodological and pragmatic viewpoints the experience of several countries which perhaps each in its own way found themselves in the obligation of improving their efficiency through the removal of disincentives and economic distor

price and concentration in hospital markets the switch from patient driven to payer driven competition perhaps the most widely accepted paradigm of industrial organization i o is that competition lowers prices or alternatively that price cost margins are lower in less concentrated markets 1 the applicability of this paradigm for hospital markets has been questioned for example in united states vs carilion health system and roanoke valley hospital the district and appellate courts accepted evidence that hospital prices are lower in more concentrated markets and thereby approved a merger between the two largest hospitals in a three hospital market 2 the view that competition has a weak or perverse effect on hospital prices is shared by a number of researchers 3 is a common theme in newspaper stories

can empirical demand models assist in con comparative reviews a case study in florida certificate of need con programs for new hospital construction are intended to foster the best selection among competing hospital applications given demands for hospital care in the community yet the merits of con depend in part on the quality of the comparative review process this article examines a case study in florida to illustrate the utility of empirical evaluations using patient choice models i estimate such models to show how patients would respond to a change in hospital choices by simulating the welfare effects of the proposed hospitals i can further predict how prices of hospital care differ by applicant results suggest that empirical analysis using data on patient choice of hospitals may better inform the review process at the same time however it may not give a unique ranking without additional analysis of the fixed costs of proposed services in the context of existing marketwide capacity

the changing effects of competition on non profit and for profit hospital pricing behavior abstract has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payors this paper uses time series cross sectional methods on california hospital discharge data from 1986 1994 to show the association of hospital prices with measures of market concentration changed steadily over this period with prices now higher in less competitive areas even for non profit hospitals regression results are used to simulate the price impact of hypothetical hospital mergers

is the impact of managed care on hospital prices decreasing 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

does competition between hospitals improve the quality of care hospital death rates and the nhs internal market payer driven competition has been widely advocated as a means of increasing efficiency in health care markets the 1990s reforms to the uk health service followed this path we examine whether competition led to better outcomes for patients as measured by death rates after treatment following heart attacks using data that until 1999 was not publicly available in any form on hospital level death rates we find that the relationship between competition and quality of care appears to be negative greater competition is associated with higher death rates controlling for patient mix and other observed characteristics of the hospital and the catchment area for its patients however the estimated impact of competition is small jel classification i1 l8 h4

estimation and identification of merger effects an application to hospital mergers abstract existing empirical estimates of merger effects are compromised by the fact that merging and nonmerging entities differ in unobserved ways that independently affect outcomes of interest to obtain an unbiased estimate of the effect of consummated mergers i propose an approach that focuses on the response of rivals to mergers and accounts for the endogeneity of exposure to these mergers i apply this approach to evaluate the impact of independent hospital mergers in the united states between 1989 and 1996 using the physical colocation of rivals as an instrument for whether they merge i find a sizeable one time increase in price following a rival s merger with the greatest increase occurring among hospitals nearest the merging hospitals these results are more consistent with predictions from structural models of the hospital industry than with prior observational estimates of the effects of hospital mergers

pricing and market concentration in oligopoly markets this paper investigates the relationship between prices and market concentration in the auto rental industry we assemble an original database that includes the number of auto rental operators and other exogenous demand and cost conditions at every commercial airport in the country the data are interesting because we observe a large variation in market structure ranging from more than 100 monopoly and duopoly markets to several competitive airports with more than eight firms in addition we collect daily rental prices in each market that are regressed against the number of operating firms and other control factors due to potential biases in treating market participants as exogenously assigned we employ a two stage estimation procedure in which an equilibrium model of endogenous market structure provides correction terms for the second stage price regression results show that ignoring the endogeneity of market structure severely underestimates the impact of additional competitors on prices with the

assessing competition in hospital care markets the importance of accounting for quality differentiation quality differentiation is especially important in the hospital industry where the choices of medicare patients are unaffected by prices unlike previous studies that use geographic market concentration to estimate hospital competitiveness this article emphasizes the importance of quality differentiation in this spatially differentiated market i estimate a random coefficients discrete choice model that predicts patient flow to different hospitals and find that demand responses to both distance and quality are substantial the estimates suggest that patients do not substitute toward alternative hospitals in proportion to current market shares implying that geographic market concentration is an inappropriate measure of hospital competitiveness

food in sub saharan africa trends and policy challenges for the 1990s abstract the food situation in africa can be expected to become increasingly serious as the end of the century approaches the gap between domestic supply and food needs in rapidly widening yield increasing technology becomes essential in view of land scarcity in high potential areas and sustainability problems in marginal zones the concern of governments for food self sufficiency however must not divert attention from the primary objective of household food security which is essentially a question of households real income accelerated rural growth and improved rural health and sanitation services accessible to the poor are central elements for household food security improvement

strategic integration of hospitals and physicians a striking development in the healthcare market place has been the formation of strategic relationships between hospitals and physicians hospital physician integration appears to be a response to rapidly expanding managed care health insurance we examine whether integration lead to efficiency gains from transaction cost economies thereby allowing providers to offer managed care insurance plans lower prices or whether integration is really a strategy to improve bargaining power and thereby increase prices we find that integration has little effect on efficiency but is associated with an increase in prices especially when the integrated organization is exclusive and occurs in less competitive markets

resolving the impasse on hospital scale economics a new approach the existence of scale economies in hospitals in important for both public and managerial policy yet production and cost function studies have found conflicting evidence more recently more sophisticated studies have typically found scale diseconomies which is inconsistent with the views of industry participants and observers in the early 1980s california deregulated both private and public health insurance medical which provides a natural laboratory for examining hospital efficiency using stigler s original and multivariate survivor analysis we resolve the conflict in favour of scale economies and reconcile the controversy the survivorship methodology in simple to apply and a useful tool in conjunction with statistical cost and production studies

hospital integration and vertical consolidation an analysis of acquisitions in new york state abstract while prior studies tend to view hospital integration through the lens of horizontal consolidation i provide an analysis of its vertical aspects i examine the effect of hospital acquisitions in new york state on the distribution of market share for major cardiac procedures across providers in target markets i find evidence of benefits to acquirers via business stealing with the resulting redistribution of volume across providers having small effects if any on total welfare with respect to cardiac care the results of this analysis along with similar assessments for other services can be incorporated into future studies of hospital consolidation

structural adjustment a survey of the issues and options abstract the article raises and attempts to answer questions such as adjustment for what purpose to what shocks of what factors or forces by whom who loses and who benefits from adjustment and adjustment how it also discusses the question of adjustment when the distinction between external and internal shocks is rejected as neither helpful for the allocation of blame nor for the justification of raising finance an analysis of the impact on the poor is sketched out after a brief discussion of the role of the market and government intervention in adjustment policy and the fallacy of aggregating country policies there follows a discussion of the double paradox of conditionality why should a donor impose conditions that are in the best interest of the recipient and why instead of paying for getting good advice is the recipient rewarded with extra money ten possible reasons are given the paper ends with proposals as to how to overcome the conflict between national sovereignty and assuring that donor money is well spent

antitrust in the not for profit sector abstract although the not for profit sector contributes greatly to aggregate output in many industries there has been little explicit analysis of the economic consequences of applying antitrust policy in this sector despite the differences between for profit and nonprofit firms stressed in conventional economic analyses u s antitrust law generally does not distinguish between these two organizational forms this paper argues that under plausible assumptions and with possible exceptions the same incentives to restrain trade exist in the nonprofit sector as in the for profit sector altruistic firms benefit from exploiting market power even when they would price below cost in the absence of competition in fact the efficiency gains from antitrust policy may often be larger for nonprofit firms therefore a policy of promoting competition has social value even when producers motivations are altruistic the argument for uniform antitrust treatment of the two sectors extends to exemptions from antitru

a structural approach to market definition with an application to the hospital industry a structural approach to market definition market definition is essential to merger analysis because no standard approach to market definition exists opposing parties in antitrust cases often disagree about the extent of the market these differences have been particularly relevant in the hospital industry where the courts have denied seven of eight merger challenges since 1994 due largely to disagreements over geographic market definition we compare geographic markets produced using common ad hoc methodologies to a method that directly applies the ssnip test to hospitals in california using a structural model our results suggest that previously employed methods overstate hospital demand elasticities by a factor of 2 4 to 3 4 and define larger markets than would be implied by the merger guidelines s hypothetical monopolist test the use of these methods in differentiated product industries may lead to mistaken geographic market delineation and was likely a contributing factor to the permissive legal environment for hospital mergers

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

the effects of market structure and bargaining position on hospital prices ppos and hmos have gained widespread acceptance due in part to the belief that excess capacity and competitive market conditions can be leveraged to negotiate lower prices with health care providers we investigated prices obtained in different types of markets by the largest ppo in california our findings indicate that greater hospital competition leads to lower prices furthermore as the importance of a hospital to the ppo in an area increases the price rises substantially our testing of alternative methods for defining hospital geographic markets reveals that the common practice of using counties to define the market leads to an underestimate of the price increasing effects of a merger

health insurance as a two part pricing contract monopolies appear throughout health care we show that health insurance operates like a conventional two part pricing contract that allows monopolists to extract profits without inefficiently constraining quantity when insurers are free to offer a range of insurance contracts to different consumer types health insurance markets perfectly eliminate deadweight losses from upstream health care monopolies frictions limiting the sorting of different consumer types into different insurance contracts restore some of these upstream monopoly losses which manifest as higher rates of uninsurance rather than as restrictions in quantity utilized by insured consumers empirical analysis of pharmaceutical patent expiration supports the prediction that heavily insured markets experience little or no efficiency loss under monopoly while less insured markets exhibit behavior more consistent with the standard theory of monopoly

profit variability in for profit and not for profit hospitals this paper proposes two tests of the hypothesis that not for profit hospitals nfps behave differently than for profit hospitals the profit variability test states that the profits of an nfp will be less variable over time than profits of a for profit hospital if the nfp maximizes utility subject to a profit constraint the second test examines whether nfp profits respond less to change in exogenous factors such as medicare reimbursement rates than profits of for profit hospitals both tests performed on panel data from 1983 to 1988 support the hypothesis that nfps behave differently than for profit hospitals

the effect of reimbursement on the intensity of hospital services we examine how hospital treatment intensity is affected by an exogenous change in average reimbursement for an admission theory predicts that treatment intensity would be most affected for highly profitable services but unaffected for unprofitable services we use medicare inpatient data from 11 states for 16 disease categories that vary in the generosity of reimbursement to test this prediction using the coefficients from quantile regressions we calculate a difference in difference estimate of the effect of the balanced budget act bba of 1998 comparing the pre and post bba change in treatment intensity at high medicare share hospitals to low medicare share hospitals we find that not for profit hospitals cut treatment intensity at the 50th 75th and 95th quantiles only for generously reimbursed services intensity at the 25th percentile was unaffected regardless of generosity we did not measure a statistically significant response at for profit or public hospitals to the bba

on the existence of a unique correlated equilibrium in cournot oligopoly abstract in this paper i provide sufficient conditions under which the unique pure strategy nash equilibrium of the cournot oligopoly model with or without product differentiation is also the unique correlated equilibrium my conditions are 1 the demand function is linear and 2 the cost function is weakly convex

correlated equilibrium of cournot oligopoly competition abstract this paper shows that there is a unique correlated equilibrium which is the unique nash equilibrium for the standard cournot oligopoly model with linear demand and asymmetric linear costs journal of economic literature classification numbers c72 d43

hospital profits the effects of reimbursement policies this paper provides a theoretical and empirical analysis of the effect of cost based reimbursement cbr on hospital costs and charges it takes issue with previous analyses which have treated cbr as paying economic costs plus a mark up and have concluded that the mark up is too small to significantly distort hospital decision making the basic thesis here is that if reimbursement is based on costs accounting costs become a price to cost paying patients and will be optimized to maximize revenue a hospital serving both cost and charge paying private patients can set two price schedules accounting profits ratio of charges to costs are not a measure of economic profit but of relative prices to these two groups of patients in the absence of constraints from regulation or patient co payment the optimum level of accounting costs would be infinite in practice the medicare reimbursement formula links allowable costs to charges received from charge paying patients this formula creates incentives for the hospital to raise charges above the single price profit maximizing monopoly level this inflationary effect of the medicare formula does not presuppose that medicare pays less than full cost the empirical analysis of hospital laboratory costs and charges generally supports the predictions for other departments the conclusions are consistent but more tentative because of data limitations overall evidence suggests minimal cross subsidy between cost and charge paying patients comparisons of cost and charge levels in for profit voluntary non profit and government hospitals are presented but it is emphasized that inferences about relative efficiency and profitability cannot be drawn from accounting data given the incentives created by cbr

the effect of competitive pressure on charity hospital responses to price shopping in california abstract since higher charges to private patients are a major source of financing for hospital care to the uninsured increased price shopping by private payers may mean that hospitals are less able to provide such care i study the effect of increased price shopping on california hospital markets over the 1984 1988 period i find that there was a large fall in net private revenues and net income in the least concentrated hospital markets in the state after the advent of price shopping perhaps as a result care to the uninsured fell dramatically in these markets as well relative to more concentrated markets