Insurer Competition and Negotiated Hospital Prices (original) (raw)
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The Effects of Price Competition and Reduced Subsidies for Uncompensated Care on Hospital Mortality
Health Services Research, 2005
Objective. To determine whether hospital mortality rates changed in New Jersey after implementation of a law that changed hospital payment from a regulated system based on hospital cost to price competition with reduced subsidies for uncompensated care and whether changes in mortality rates were affected by hospital market conditions. Data Sources/Study Setting. State discharge data for New Jersey and New York from 1990 to 1996. Study Design. We used an interrupted time series design to compare risk-adjusted inhospital mortality rates between states over time. We compared the effect sizes in markets with different levels of health maintenance organization penetration and hospital market concentration and tested the sensitivity of our results to different approaches to defining hospital markets. Data Collection/Extraction Methods. The study sample included all patients under age 65 admitted to New Jersey or New York hospitals with stroke, hip fracture, pneumonia, pulmonary embolism, congestive heart failure, hip fracture, or acute myocardial infarction (AMI). Principal Findings. Mortality among patients in New Jersey improved less than in New York by 0.4 percentage points among the insured ( p 5 .07) and 0.5 percentage points among the uninsured ( p 5 .37). There was a relative increase in mortality for patients with AMI, congestive heart failure, and stroke, especially for uninsured patients with these conditions, but not for patients with the other four conditions we studied. Less competitive hospital markets were significantly associated with a relative decrease in mortality among insured patients. Conclusions. Market-based reforms may adversely affect mortality for some conditions but it appears the effects are not universal. Insured patients in less competitive markets fared better in the transition to price competition.
Hospital prices and market structure in the hospital and insurance industries
Health Economics, Policy and Law, 2010
There has been substantial consolidation among health insurers and hospitals, recently, raising questions about the effects of this consolidation on the exercise of market power. We analyze the relationship between insurer and hospital market concentration and the prices of hospital services. We use a national US dataset containing transaction prices for health care services for over 11 million privately insured Americans. Using three years of panel data, we estimate how insurer and hospital market concentration are related to hospital prices, while controlling for unobserved market effects. We find that increases in insurance market concentration are significantly associated with decreases in hospital prices, whereas increases in hospital concentration are non-significantly associated with increases in prices. A hypothetical merger between two of five equally sized insurers is estimated to decrease hospital prices by 6.7%.
Health Services Research, 2005
Objective. To determine whether hospital mortality rates changed in New Jersey after implementation of a law that changed hospital payment from a regulated system based on hospital cost to price competition with reduced subsidies for uncompensated care and whether changes in mortality rates were affected by hospital market conditions. Data Sources/Study Setting. State discharge data for New Jersey and New York from 1990 to 1996. Study Design. We used an interrupted time series design to compare risk-adjusted inhospital mortality rates between states over time. We compared the effect sizes in markets with different levels of health maintenance organization penetration and hospital market concentration and tested the sensitivity of our results to different approaches to defining hospital markets. Data Collection/Extraction Methods. The study sample included all patients under age 65 admitted to New Jersey or New York hospitals with stroke, hip fracture, pneumonia, pulmonary embolism, congestive heart failure, hip fracture, or acute myocardial infarction (AMI). Principal Findings. Mortality among patients in New Jersey improved less than in New York by 0.4 percentage points among the insured (p 5 .07) and 0.5 percentage points among the uninsured (p 5 .37). There was a relative increase in mortality for patients with AMI, congestive heart failure, and stroke, especially for uninsured patients with these conditions, but not for patients with the other four conditions we studied. Less competitive hospital markets were significantly associated with a relative decrease in mortality among insured patients. Conclusions. Market-based reforms may adversely affect mortality for some conditions but it appears the effects are not universal. Insured patients in less competitive markets fared better in the transition to price competition.
Competition in Health Care Markets
2011
This paper reviews the literature devoted to studying markets for health care services and health insurance. There has been tremendous growth and progress in this field. A tremendous amount of new research has been done in this area over the last 10 years. In addition, there has been increasing development and use of frontier industrial organization methods. We begin by examining research on the determinants of market structure, considering both static and dynamic models. We then model the strategic determination of prices between health insurers and providers where insurers market their products to consumers based, in part, on the quality and breadth of their provider network. We then review the large empirical literature on the strategic determination of hospital prices through the lens of this model. Variation in the quality of health care clearly can have large welfare consequences. We therefore also describe the theoretical and empirical literature on the impact of market structure on quality of health care. The paper then moves on to consider competition in health insurance markets and physician services markets. We conclude by considering vertical restraints and monopsony power.
Market structure and hospital–insurer bargaining in the Netherlands
The European Journal of Health Economics, 2011
In 2005, competition was introduced in part of the hospital market in the Netherlands. Using a unique dataset of transactions and list prices between hospitals and insurers in the years 2005 and 2006, we estimate the influence of buyer and seller concentration on the negotiated prices. First, we use a traditional structure-conduct-performance model (SCP-model) along the lines of Melnick et al. (J Health Econ 11(3): 217-233, 1992) to estimate the effects of buyer and seller concentration on price-cost margins. Second, we model the interaction between hospitals and insurers in the context of a generalized bargaining model similar to Brooks et al. (J Health Econ 16: 417-434, 1997). In the SCP-model, we find that the market shares of hospitals (insurers) have a significantly positive (negative) impact on the hospital price-cost margin. In the bargaining model, we find a significant negative effect of insurer concentration, but no significant effect of hospital concentration. In both models, we find a significant impact of idiosyncratic effects on the market outcomes. This is consistent with the fact that the Dutch hospital sector is not yet in a long-run equilibrium. Keywords Emerging health care markets Á Regulation Á Market structure Á Bargaining JEL Classification I11 Á I18 Á L1 Á C7 The first three authors are Extramural Fellows of TILEC, Tilburg University. This paper reflects the personal views of the authors, which are not necessarily those of their employers. This paper is not in any way binding for the Dutch government, in particular for future decisions of the Dutch Healthcare Authority on the topics discussed.
Costs and price competition in California hospitals, 1980-1990
Health Affairs, 1994
Critics of health care reform proposals that incorporate managed competition contend that it has never been broadly implemented. However, insurance plans that combine insurance with the provision of care have been widely implemented and have been tested most extensively in California. This DataWatch explores California's experience with health maintenance organizations (HMOs) and preferred provider organizations (PPOs), the introduction of which was followed by overall reductions in hospital costs. These reductions were larger in competitive markets. If implemented on a national scale, such selective contracting could be expected to reduce the growth of hospital costs even more rapidly than occurred in California. S everal health care reform proposals rely on managed competition to control costs. This approach envisages multiple levels of competition. Large health insurance purchasing pools would be created and would provide their members with information needed to rank competing insurance plans along several dimensions, such as price, coverage, and quality. Workers would be encouraged to be price-sensitive in their purchase of insurance by a requirement that the costs for services beyond those included in a standard minimum benefit package be paid for out of pocket. Insurers would compete vigorously for enrollees by trying to offer the most attractive combination of prices and plans. Insurers would play a critical role in a managed competition-based system by contracting with providers that offer the best prices, locations, and quality, thereby transmitting competitive pressure from the insurance market to health care providers. Providers would organize themselves into entities that could absorb the risk of contractual obligations that specify costs (and possibly quality) in advance. In combination, these changes are designed to provide all parties-beneficiaries, insurers, and providers-with incentives for cost-effective behavior. A major criticism of managed competition is that it is largely a theoretical construct, with little or no experience or empirical evidence to support its effectiveness. Although this is the case for some elements of the current health care reform proposals-particularly, forming purchasing pools and
The effects of market structure and bargaining position on hospital prices
Journal of Health Economics, 1992
PPOs and HMOs have gained widespread acceptance due in part to the belief that excess capacity and competitive market conditions can be leveraged to negotiate lower prices with health care providers, We investigated prices obtained in different types of markets by the largest PPO in California. Our tindings indicate that greater hospital competition leads to lower prices. Furthermore, as the importance of a hospital to the PPO in an area increases, the price rises substantially. Our testing of alternative methods for defining hospital geographic markets reveals that the common practice of using counties to define the market leads to an underestimate of the price-increasing effects of a merger.
Reconsidering the Role of Competition in Health Care Markets: Introduction
Journal of Health Politics, Policy and Law, 2000
In recent years there has been a surge of interest in reforming the organization and delivery of health systems by relying more on market competition. Although much of the impetus has emanated from the United States, the phenomenon is worldwide (Brown 1998). Recognizing the significance of these trends, in May 1998 we organized an international conference in Berlin on "Reconsidering the Role of Competition in Health Care Markets." The two-day meeting was jointly sponsored by the UCLA Center for Health Policy Research, the Karolinska Institutet in Sweden, and the Wissenschaftszentrum Berlin für Sozialforschung (WZB; in English, the Berlin Science Center for Social Research). The conference, which was hosted by the WZB, included thirty-one individuals from ten countries. This special section presents a summary of the main issues on which the meeting focused, followed by ten brief reports on the interplay of markets and government in specific developed countries. It concludes with a short analysis of the implications of the forgoing material on health care policy internationally and two commentaries that bring additional perspective to these issues.