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Hospital Choices, Hospital Prices, and Financial Incentives to Physicians

Kate Ho and Ariel Pakes ()

American Economic Review, 2014, vol. 104, issue 12, 3841-84

Abstract: We estimate an insurer-specific 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-specific hospital fixed effects (capturing hospital quality). We use an inequality estimator that allows for errors in price and detailed hospital-severity interactions and obtain markedly different 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-off does not vary with capitation rates. (JEL G22, H51, I11, I13, I18, J44)

JEL-codes: G22 H51 I11 I13 I18 J44 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.12.3841
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Handle: RePEc:aea:aecrev:v:104:y:2014:i:12:p:3841-84