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  3. American Economic Review
  4. December 2014
  5. Hospital Choices, Hospital Prices, and Financial Incentives to Physicians

Hospital Choices, Hospital Prices, and Financial Incentives to Physicians

  • Kate Ho
  • Ariel Pakes
American Economic Review
vol. 104, no. 12, December 2014
(pp. 3841-84)
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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)

Citation

Ho, Kate, and Ariel Pakes. 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians." American Economic Review, 104 (12): 3841-84. DOI: 10.1257/aer.104.12.3841

Additional Materials

JEL Classification

  • G22 Insurance; Insurance Companies; Actuarial Studies
  • H51 National Government Expenditures and Health
  • I11 Analysis of Health Care Markets
  • I13 Health Insurance, Public and Private
  • I18 Health: Government Policy; Regulation; Public Health
  • J44 Professional Labor Markets; Occupational Licensing