Managed Care Discounting: Evidence from the MarketScan Database

Dor, Avi, Koroukian, Siran M. and Grossman, Michael, "Managed Care Discounting: Evidence from the MarketScan Database" (April 2004). NBER Working Paper No. W10437. Available at SSRN:

Abstract:

The paper examines price discounting by health maintenance organizations and preferred provider organizations in markets for hospital services. Our empirical analysis focuses on transaction prices for angioplasty, which is a relatively common procedure, with well defined 'product' characteristics. After controlling for patient and procedure heterogeneity and market power we find that on average prices for PPOs are 8% lower than fee-for-service plans, followed by point-of-service HMOs who capture a 24% discount. Our results are in general agreement with earlier work that shows that managed care discounts are 'real', after accounting for process of care.

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