Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior

36 Pages Posted: 6 Dec 2001 Last revised: 25 Oct 2010

See all articles by Michael Chernew

Michael Chernew

Harvard University - Department of Health Care Policy; National Bureau of Economic Research (NBER)

Gautam Gowrisankaran

University of Arizona - Eller College of Management; National Bureau of Economic Research (NBER)

A. Mark Fendrick

University of Michigan at Ann Arbor - Department of Internal Medicine

Date Written: December 2001

Abstract

In this paper we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.

Suggested Citation

Chernew, Michael E. and Gowrisankaran, Gautam and Fendrick, A. Mark, Payer Type and the Returns to Bypass Surgery: Evidence from Hospital Entry Behavior (December 2001). NBER Working Paper No. w8632, Available at SSRN: https://ssrn.com/abstract=293245

Michael E. Chernew (Contact Author)

Harvard University - Department of Health Care Policy ( email )

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National Bureau of Economic Research (NBER)

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Gautam Gowrisankaran

University of Arizona - Eller College of Management ( email )

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HOME PAGE: http://econ.arizona.edu/faculty/gowrisankaran.asp

National Bureau of Economic Research (NBER) ( email )

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A. Mark Fendrick

University of Michigan at Ann Arbor - Department of Internal Medicine ( email )

3116 Taubman Center
Ann Arbor, MI 48109-0376
United States

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