Hospital Choices, Hospital Prices and Financial Incentives to Physicians

53 Pages Posted: 17 Aug 2013

See all articles by Kate Ho

Kate Ho

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Ariel Pakes

National Bureau of Economic Research (NBER); Harvard University - Department of Economics

Date Written: August 2013

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.

Suggested Citation

Ho, Kate and Pakes, Ariel, Hospital Choices, Hospital Prices and Financial Incentives to Physicians (August 2013). NBER Working Paper No. w19333. Available at SSRN: https://ssrn.com/abstract=2311582

Kate Ho (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ariel Pakes

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Department of Economics ( email )

Littauer Center
Room 117
Cambridge, MA 02138
United States
617-495-5320 (Phone)
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