Strategic Pricing and Competitive Procurement in the Physician Services Market

47 Pages Posted: 4 Nov 2016 Last revised: 22 Jul 2017

See all articles by Guy Arie

Guy Arie

University of Rochester - Simon Business School

Alon Bergman

University of Pennsylvania - The Wharton School; University of Pennsylvania - Leonard Davis Institute of Health Economics

Gerard J. Wedig

University of Rochester - Simon Business School

Date Written: July 18, 2017

Abstract

We propose and test a model of the strategic interaction between public and private insurers in the physician services market. We depart from the standard healthcare service pricing model and allow physicians to (partially) adjust patient access based on price differences between insurers. Analysis of private and public sector insurer prices and public sector quantities supports the hypothesis that physicians respond to insurer price differences: A 10% increase in private prices decreases public beneficiaries’ share of physician services by 4%, equivalent to a per capita decrease of 1%-14% in services per public beneficiary, ceteris paribus.

Keywords: Physician, pricing, Medicare

JEL Classification: I11, I13, I18

Suggested Citation

Arie, Guy and Bergman, Alon and Wedig, Gerard J., Strategic Pricing and Competitive Procurement in the Physician Services Market (July 18, 2017). Simon Business School Working Paper No. FR 16-11, Available at SSRN: https://ssrn.com/abstract=2863979 or http://dx.doi.org/10.2139/ssrn.2863979

Guy Arie

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Alon Bergman

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

University of Pennsylvania - Leonard Davis Institute of Health Economics ( email )

Philadelphia, PA
United States

Gerard J. Wedig (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

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