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Managed care and the scale efficiency of US hospitals

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  • H. Brown
  • José Pagán

Abstract

Managed care penetration has been partly responsible for slowing down increases in health care costs in recent years. This study uses a 1992–1996 Health Care Utilization Project sample of hospitals to analyze the relationship between managed care penetration in local insurance markets and hospital scale efficiency. After controlling for hospital and market area variables, we find that managed care insurance, particularly the preferred provider type, is associated with increases in hospital scale efficiency in tertiary cases. The results presented here are consistent with the view that managed care can lead to reductions in health cost inflation by controlling the diffusion of technology via improvements in the scale efficiency of hospitals. Copyright Springer Science+Business Media, LLC 2006

Suggested Citation

  • H. Brown & José Pagán, 2006. "Managed care and the scale efficiency of US hospitals," International Journal of Health Economics and Management, Springer, vol. 6(4), pages 278-289, December.
    • Handle: RePEc:kap:ijhcfe:v:6:y:2006:i:4:p:278-289
    DOI: 10.1007/s10754-006-9005-4
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    References listed on IDEAS

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    1. Laurence C. Baker & Ciaran S. Phibbs, 2002. "Managed Care, Technology Adoption, and Health Care: The Adoption of Neonatal Intensive Care," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 524-548, Autumn.
    2. James R. Baumgardner, 1991. "The Interaction between Forms of Insurance Contract and Types of Technical Change in Medical Care," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 36-53, Spring.
    3. Sherry Glied, 2003. "Health Care Costs: On the Rise Again," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 125-148, Spring.
    4. Baker, Laurence C., 2001. "Managed care and technology adoption in health care: evidence from magnetic resonance imaging," Journal of Health Economics, Elsevier, vol. 20(3), pages 395-421, May.
    5. Laurence C. Baker & Christopher C. Afendulis & Paul A. Heidenreich, 2004. "Managed Care, Information, and Diffusion: The Case of Treatment for Heart-Attack Patients," American Economic Review, American Economic Association, vol. 94(2), pages 347-351, May.
    6. Newhouse, Joseph P., 1994. "Frontier estimation: How useful a tool for health economics?," Journal of Health Economics, Elsevier, vol. 13(3), pages 317-322, October.
    7. H. Shelton Brown, 2003. "Managed care and technical efficiency," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 149-158, February.
    8. Hill, Steven C. & Wolfe, Barbara L., 1997. "Testing the HMO competitive strategy: An analysis of its impact on medical care resources," Journal of Health Economics, Elsevier, vol. 16(3), pages 261-286, June.
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    Cited by:

    1. Mansour Abdullah Almiman, 2021. "Measuring the Efficiency of Public Hospitals in Saudi Arabia Using the Data Envelopment Analysis Approach," International Journal of Business and Management, Canadian Center of Science and Education, vol. 13(12), pages 111-111, July.
    2. Zerth Jürgen & Daum Stefanie, 2012. "Budgetbereinigung zwischen Kollektiv- und Selektivvertrag: ökonomische Aspekte aus wettbewerblicher Sicht / Selective Contracting and Collectively Financed Fund: The Way of Appropriate Adjustment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 232(4), pages 460-481, August.
    3. George Fragkiadakis & Michael Doumpos & Constantin Zopounidis & Christophe Germain, 2016. "Operational and economic efficiency analysis of public hospitals in Greece," Annals of Operations Research, Springer, vol. 247(2), pages 787-806, December.
    4. Mehmet Gok & Erkut Altındağ, 2015. "Analysis of the cost and efficiency relationship: experience in the Turkish pay for performance system," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(5), pages 459-469, June.
    5. Ng, Ying Chu, 2011. "The productive efficiency of Chinese hospitals," China Economic Review, Elsevier, vol. 22(3), pages 428-439, September.
    6. Kostas Kounetas & Fotis Papathanassopoulos, 2013. "How efficient are Greek hospitals? A case study using a double bootstrap DEA approach," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(6), pages 979-994, December.
    7. Abdullah M. Alsabah & Hassan Haghparast-Bidgoli & Jolene Skordis, 2020. "Measuring the Efficiency of Public Hospitals in Kuwait: A Two-Stage Data Envelopment Analysis and a Qualitative Survey Study," Global Journal of Health Science, Canadian Center of Science and Education, vol. 12(3), pages 121-121, March.
    8. repec:rre:publsh:v:38:y:2008:i:3:p:381-93 is not listed on IDEAS
    9. George Fragkiadakis & Michael Doumpos & Constantin Zopounidis & Christophe Germain, 2016. "Operational and economic efficiency analysis of public hospitals in Greece," Post-Print hal-01414677, HAL.
    10. Fang Hai & Miller Nolan H. & Rizzo John & Zeckhauser Richard, 2011. "Demanding Customers: Consumerist Patients and Quality of Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-51, September.

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    More about this item

    Keywords

    Hospitals; Managed care; Scale efficiency; I11; L25;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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