Network Formations and Equilibrium Prices in the Medical Care Market

Transcription

1 Network Formations and Equilibrium Prices in the Medical Care Market Mei-Lynn Hua The University of Texas at Austin Will Peichun Wang The Wharton School, University of Pennsylvania SUMR 2015 Program August 13, 2015

2 Project Overview } Data: New Hampshire Insurance Claims from } 26 acute care hospitals, 10 NH counties, 4 insurance types Question: What is the relationship between the quality of the hospital and their contracting choices? } High quality hospitals are more attractive to insurers so they are included in more networks } High quality hospitals are associated with higher costs so they are excluded 1

3 IN THE PRESS 2

4 Related Literature Hospital and Insurer Bargaining: } Gowrisankaran, Nevo and Town (2013) } Ho (2009) Discrete Choice Demand Estimation: } Berry (1992) 3

5 Health insurance plans influence which hospitals consumers decide to visit HOSPITALS HMO PPO EPO POS CONSUMERS 4

6 Distribution of Population in NH 5

7 Hospitals distributed throughout the state 6

8 Summary Statistics Variable Mean Std. Dev. Min. Max. N Market Characteristics Year-County # Patients 44,924 29, # Insurers # Hospitals # Contracts Possible # Actual Contracts Hospital Characteristics Year-Hospital # Doctors # Licensed Beds # Employees Insurer Characteristics Year-County-Insurer # Within County Hospital Visits # of Out of County Visits

9 Large variation in the number of hospitals in each market Percentage out of 100 Markets Distribution of the Number of Hospitals from One Two Three Four Five Number of Hospitals per County-Year 8

10 Most markets have all four insurance types as potential options Percentage out of 100 Markets Distribution of the Number of Insurers from Two Three Four Number of Insurers Per County-Year 9

11 About 50% of possible contracts are not formed 10

12 Herfindahl-Hirschman Index (HHI) } Measure of concentration } Range from 0 to 10,000 } A market is considered highly concentrated if it has a HHI > 1,800 HHI is calculated by sum of the squares of the market shares multiplied by 10,000 11

13 Hospital Market HHI Percent Hospital Market HHI 12

14 Insurance Market HHI Percent Insurance Market HHI 13

15 Within Hospital HHI Percent Within Hospital HHI 14

16 Logistic Model } log (Smh) log(smo) =β0+β1xh+β2xi+β3xa+β4xm+ β5xy + ɛ h = hospital characteristics o Number of Doctors o Travel Distance i = patient characteristics o Age o Gender a = hospital (26 acute care hospitals) m = four insurers (HMO, PPO, POS, EPO) y = year ( ) 15

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18 Hospital Quality Index Percentage Hospital Quality Index 17

19 Network Diversity vs. Hospital Quality Hospital Quality Index 18

20 Correlation Regression Table Quality ** (0.375) Effects of Quality on Hospital Network Diversity Log (HHI) # Contracts Hospital Saturation Market Saturation (1.013) *** (0.028) Variance (0.031) Year FEs Market FEs Hospital FEs Adjusted R 2 : Observations: Standard errors in parentheses *p < 0.10, ** p < 0.05, *** p <

21 Conclusions } Higher quality hospitals are not as selective in contracting with insurers and lead to more diverse networks } Insurers may recognize the demand of these hospitals in a given county so the hospital has greater bargaining power } Competition between hospitals leads to less perceived differences in quality } Implications for hospital mergers 20

22 Acknowledgments } Will Peichun Wang } Joanne Levy, MBA, MCP } Safa Browne } Leonard Davis Institute of Health Economics } SUMR 2015 Cohort

23 Questions?