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Do Health Insurers Contract The Best Providers? Provider Networks, Quality, And Costs

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  • Jan Boone
  • Christoph Schottmüller

Abstract

We provide a modeling framework to analyze selective contracting in the health‐care sector. Two health‐care providers differ in quality and costs. When buying health insurance, consumers observe neither provider quality nor costs. We derive an equilibrium where health insurers signal provider quality through their choice of provider network. Selective contracting focuses on low‐cost providers. Contracting both providers signals high quality. Market power reduces the scope for signaling, thereby leading to lower quality and inefficiency.

Suggested Citation

  • Jan Boone & Christoph Schottmüller, 2019. "Do Health Insurers Contract The Best Providers? Provider Networks, Quality, And Costs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(3), pages 1209-1247, August.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:3:p:1209-1247
    DOI: 10.1111/iere.12383
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    Cited by:

    1. Boone, Jan, 2019. "Health provider networks with private contracts: Is there under-treatment in narrow networks?," Journal of Health Economics, Elsevier, vol. 67(C).

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