Provider networks in health care markets
Abstract
Does managed care send expectant mothers to hospitals they would choose even if their choice of hospital was not limited? I find that Medicaid managed care patients are redirected to hospitals that enrollees of more generous insurance payers with the same personal characteristics do not go to. However, Medicare managed care enrollees do not face an increased risk of having a cesarean delivery at the hospital they attend, which is interpreted as evidence that they are redirected to high quality hospitals. Managed care has been successful in reducing the price and length of stay of hospital visits in part by selectively contracting with hospitals to create a network of hospitals to provide all health services to enrollees. A more recent innovation has been the creation of networks to provide only a narrow range of services, a strategy widely used by managed behavioral health organization (MBHO) firms in the provision of mental health and substance abuse services. I find that if hospitals are able to set price above cost, then less competition increases the difference between price and cost. However, if a hospital bargains with the MBHO over price, then the level of competition in the hospital's market does not affect price. If the MBHO sets price and the hospital has some ability to increase the length of stay, the level of competition does not affect length of stay with the exception of in the Boston market. Although insurance payers vary in their reimbursement methods, hospitals may set average length of stay in common across all payers in response to economies of scale or scope. The commonality hypothesis states that as the share of patient days paid by an insurance payer increases, the hospital will set length of stay more in line with the incentives offered by that particular payer. I find some evidence to support the commonality hypothesis: the more important Medicare and private managed care are to a general hospital, the shorter the average length of stay of all patients.
Recommended Citation
Elaine Mary Fleming,
"Provider networks in health care markets"
(January 1, 2003).
Boston College Dissertations and Theses.
Paper AAI3103290.
http://escholarship.bc.edu/dissertations/AAI3103290
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