Is the impact of managed care on hospital prices decreasing?

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

Journal of Health Economics, 2008, vol. 27, issue 2, 362-376

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.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:27:y:2008:i:2:p:362-376

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