Hospital Choices, Hospital Prices and Financial Incentives to Physicians
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.
We thank Mark Shepard, Lucia Tian Tian and Zach Brown for excellent research assistance. Thanks to participants at numerous seminars and to four helpful referees for their comments and suggestions. All remaining errors are our own. We declare that we have no relevant or material financial interests that relate to the research described in this paper. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Ho, Kate, and Ariel Pakes. 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians." American Economic Review, 104(12): 3841-84. citation courtesy of
Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-84, December. citation courtesy of