Do Hospitals Respond to Increasing Prices by Supplying Fewer Services?
Martin Salm and
Ansgar Wübker ()
No 9229, IZA Discussion Papers from Institute of Labor Economics (IZA)
Medical providers often have a significant influence on treatment decisions which they can use in their own financial interest. Classical models of supplier-induced demand predict that medical providers will supply fewer services if they face increasing prices. We test this prediction based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement – with increasing prices for some hospitals and decreasing prices for others – without affecting the relative prices for different types of patients. Based on administrative data, we find that hospitals do indeed react to increasing prices by reducing service supply.
Keywords: physician-induced demand; hospital care; prospective payment (search for similar items in EconPapers)
JEL-codes: I11 L10 L21 (search for similar items in EconPapers)
Pages: 39 pages
New Economics Papers: this item is included in nep-eur, nep-hea and nep-ind
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Working Paper: Do hospitals respond to increasing prices by supplying fewer services? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp9229
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