NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior

Michael Chernew, Gautam Gowrisankaran, A. Mark Fendrick

NBER Working Paper No. 8632
Issued in December 2001
NBER Program(s):   HC

In this paper we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.

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Document Object Identifier (DOI): 10.3386/w8632

Published: Chernew, Michael, Gautam Gowrisankaran and A. Mark Fendrick. "Payer Type And The Returns To Bypass Surgery: Evidence From Hospital Entry Behavior," Journal of Health Economics, 2002, v21(3,May), 451-474.

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