Managed Care and Physician Incentives: The Effects of Competition on the Cost and Quality of Care

Contributions to Economic Analysis & Policy, 2006

Posted: 14 Dec 2013

See all articles by David J. Cooper

David J. Cooper

Case Western Reserve University - Department of Economics

James B. Rebitzer

Boston University School of Management; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Bard College - The Levy Economics Institute

Date Written: 2006

Abstract

We analyze the effect that competition between HMOs has on the cost and quality of medical services. Our key result is that increasing competition enhances consumer utility while also moderating the impact of managed care on quality and costs. Indeed, we find that heightened competition between HMOs can cause an overall increase in care quality and costs. This result derives from an important, but overlooked, feature of the managed care market place. Plans differentiate themselves by the size and depth of their provider network. The resulting competition to attract physicians exerts a moderating effect on the incentive contracts HMOs write with providers.

Keywords: managed care, physician incentives, product differentiation, norms

Suggested Citation

Cooper, David Jacob and Rebitzer, James B., Managed Care and Physician Incentives: The Effects of Competition on the Cost and Quality of Care (2006). Contributions to Economic Analysis & Policy, 2006. Available at SSRN: https://ssrn.com/abstract=2366871

David Jacob Cooper

Case Western Reserve University - Department of Economics ( email )

Weatherhead School of Management 10900 Euclid Avenue
Cleveland, OH 44106
United States
216-368-4294 (Phone)

James B. Rebitzer (Contact Author)

Boston University School of Management ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617 353 4605 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Bard College - The Levy Economics Institute

Blithewood
Annandale-on-Hudson, NY 12504
United States

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