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Impact of Mortality-Based Performance Measures on Hospital Pricing: the Case of Colon Cancer Surgeries

Author

Listed:
  • Avi Dor
  • Partha Deb
  • Michael Grossman
  • Gregory Cooper
  • Siran Koroukian
  • Fang Xu

Abstract

We estimate price regressions for surgical procedures used to treat colon cancer, a leading cause of cancer mortality. Using a claims database for self-insured employers, we focus on transaction prices, rather than more commonly available billing data that do not reflect actual payments made. Although the responsiveness of prices to hospital performance depends on the impact of quality on the slope of the quantity-demand of the payers, which are not known a priory, it is often assumed that higher performing hospitals are able to command higher prices. To test this hypothesis we construct performance rankings, based on hospital excess-mortality and incorporate them into our price models. We are interested in the type information available to large payers who negotiate prices on behalf of their members. To get a cancer-specific index we emulate the widely-reported risk-adjustment methodology used in the federal Hospital Compare reporting system for ranking cardiac performance. The effects were consistently negative in all models (adverse quality reduces price), though not significant. However, we observe a rational pricing structure whereby higher treatment complexity is reflected in higher price differentials, controlling for patient characteristics and market structure.

Suggested Citation

  • Avi Dor & Partha Deb & Michael Grossman & Gregory Cooper & Siran Koroukian & Fang Xu, 2013. "Impact of Mortality-Based Performance Measures on Hospital Pricing: the Case of Colon Cancer Surgeries," NBER Working Papers 19447, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19447
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    References listed on IDEAS

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    1. Avi Dor & Michael Grossman & Siran M. Koroukian, 2004. "Hospital Transaction Prices and Managed-Care Discounting for Selected Medical Technologies," American Economic Review, American Economic Association, vol. 94(2), pages 352-356, May.
    2. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
    3. Dor, Avi & Farley, Dean E., 1996. "Payment source and the cost of hospital care: Evidence from a multiproduct cost function with multiple payers," Journal of Health Economics, Elsevier, vol. 15(1), pages 1-21, February.
    4. Avi Dor & Siran M. Koroukian & Michael Grossman, 2004. "Managed Care Discounting: Evidence from the MarketScan Database," NBER Working Papers 10437, National Bureau of Economic Research, Inc.
    5. Manning, Willard G. & Mullahy, John, 2001. "Estimating log models: to transform or not to transform?," Journal of Health Economics, Elsevier, vol. 20(4), pages 461-494, July.
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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