IDEAS home Printed from https://ideas.repec.org/p/yor/hectdg/18-25.html
   My bibliography  Save this paper

Do hospitals respond to decreasing prices by supplying more services?

Author

Listed:
  • Salm, M.;
  • Wübker, A.;

Abstract

Regulated prices are common in markets for medical care. We estimate the effect of changes in regulated reimbursement prices on volume of hospital care based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement – with increasing prices for some hospitals and decreasing prices for others – without affecting the relative prices for different groups of patients or types of treatment. Based on administrative data, we find that hospitals react to decreasing prices by supplying more services. We interpret our findings as evidence for a negative income effect of lower prices on higher volume of care.

Suggested Citation

  • Salm, M.; & Wübker, A.;, 2018. "Do hospitals respond to decreasing prices by supplying more services?," Health, Econometrics and Data Group (HEDG) Working Papers 18/25, HEDG, c/o Department of Economics, University of York.
    • Handle: RePEc:yor:hectdg:18/25
    as

    Download full text from publisher

    File URL: https://www.york.ac.uk/media/economics/documents/hedg/workingpapers/1825.pdf
    File Function: Main text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Shigeoka, Hitoshi & Fushimi, Kiyohide, 2014. "Supplier-induced demand for newborn treatment: Evidence from Japan," Journal of Health Economics, Elsevier, vol. 35(C), pages 162-178.
    2. Pilny, Adam, 2014. "Mergers and Acquisitions in the German Hospital Market – Who are the Targets?," Ruhr Economic Papers 518, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Jeffrey Clemens & Joshua D. Gottlieb, 2014. "Do Physicians' Financial Incentives Affect Medical Treatment and Patient Health?," American Economic Review, American Economic Association, vol. 104(4), pages 1320-1349, April.
    4. Ankit Kumar & Michael Schoenstein, 2013. "Managing Hospital Volumes: Germany and Experiences from OECD Countries," OECD Health Working Papers 64, OECD Publishing.
    5. Thomas G. McGuire & Mark V. Pauly, 1991. "Physician Response to Fee Changes with Multiple Payers," Papers 0015, Boston University - Industry Studies Programme.
    6. Leemore S. Dafny, 2005. "How Do Hospitals Respond to Price Changes?," American Economic Review, American Economic Association, vol. 95(5), pages 1525-1547, December.
    7. Robert G. Evans, 1974. "Supplier-Induced Demand: Some Empirical Evidence and Implications," International Economic Association Series, in: Mark Perlman (ed.), The Economics of Health and Medical Care, chapter 10, pages 162-173, Palgrave Macmillan.
    8. John A. Rizzo & Richard J. Zeckhauser, 2003. "Reference Incomes, Loss Aversion, and Physician Behavior," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 909-922, November.
    9. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
    10. Jurgita Januleviciute & Jan Erik Askildsen & Oddvar Kaarboe & Luigi Siciliani & Matt Sutton, 2016. "How do Hospitals Respond to Price Changes? Evidence from Norway," Health Economics, John Wiley & Sons, Ltd., vol. 25(5), pages 620-636, May.
    11. Yip, Winnie C., 1998. "Physician response to Medicare fee reductions: changes in the volume of coronary artery bypass graft (CABG) surgeries in the Medicare and private sectors," Journal of Health Economics, Elsevier, vol. 17(6), pages 675-699, December.
    12. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
    13. He, Daifeng & Mellor, Jennifer M., 2012. "Hospital volume responses to Medicare's Outpatient Prospective Payment System: Evidence from Florida," Journal of Health Economics, Elsevier, vol. 31(5), pages 730-743.
    14. McGuire, Thomas G. & Pauly, Mark V., 1991. "Physician response to fee changes with multiple payers," Journal of Health Economics, Elsevier, vol. 10(4), pages 385-410.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Robert Messerle & Jonas Schreyögg, 2024. "Country-level effects of diagnosis-related groups: evidence from Germany’s comprehensive reform of hospital payments," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 25(6), pages 1013-1030, August.
    2. He, Wen, 2023. "Social medical insurance integration and health care disparities in China: Evidence from an administrative claim dataset," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 20-39.
    3. Bäuml, Matthias & Dette, Tilman & Pollmann, Michael, 2022. "Price and income effects of hospital reimbursements," Journal of Health Economics, Elsevier, vol. 81(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salm, Martin & Wübker, Ansgar, 2015. "Do Hospitals Respond to Increasing Prices by Supplying Fewer Services?," IZA Discussion Papers 9229, Institute of Labor Economics (IZA).
    2. Shigeoka, Hitoshi & Fushimi, Kiyohide, 2014. "Supplier-induced demand for newborn treatment: Evidence from Japan," Journal of Health Economics, Elsevier, vol. 35(C), pages 162-178.
    3. Barili, Emilia & Bertoli, Paola & Grembi, Veronica, 2021. "Fee equalization and appropriate health care," Economics & Human Biology, Elsevier, vol. 41(C).
    4. Daifeng He & Peter McHenry & Jennifer M. Mellor, 2020. "Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care," Health Economics, John Wiley & Sons, Ltd., vol. 29(6), pages 655-670, June.
    5. Véra Zabrodina & Mark Dusheiko & Karine Moschetti, 2020. "A moneymaking scan: Dual reimbursement systems and supplier‐induced demand for diagnostic imaging," Health Economics, John Wiley & Sons, Ltd., vol. 29(12), pages 1566-1585, December.
    6. Barili, E; & Bertoli, P; & Grembi, V;, 2020. "Title: Fees equalization and Appropriate Health Care," Health, Econometrics and Data Group (HEDG) Working Papers 20/09, HEDG, c/o Department of Economics, University of York.
    7. Erin M. Johnson & M. Marit Rehavi, 2016. "Physicians Treating Physicians: Information and Incentives in Childbirth," American Economic Journal: Economic Policy, American Economic Association, vol. 8(1), pages 115-141, February.
    8. Fu, Hongqiao & Li, Ling & Yip, Winnie, 2018. "Intended and unintended impacts of price changes for drugs and medical services: Evidence from China," Social Science & Medicine, Elsevier, vol. 211(C), pages 114-122.
    9. Claudia Keser & Claude Montmarquette & Martin Schmidt & Cornelius Schnitzler, 2020. "Custom-made health-care: an experimental investigation," Health Economics Review, Springer, vol. 10(1), pages 1-12, December.
    10. Lubensky, Dmitry & Schmidbauer, Eric, 2018. "Equilibrium informativeness in veto games," Games and Economic Behavior, Elsevier, vol. 109(C), pages 104-125.
    11. Lien, Hsien-Ming & Albert Ma, Ching-To & McGuire, Thomas G., 2004. "Provider-client interactions and quantity of health care use," Journal of Health Economics, Elsevier, vol. 23(6), pages 1261-1283, November.
    12. Geruso, Michael & Richards, Michael R., 2022. "Trading spaces: Medicare's regulatory spillovers on treatment setting for non-Medicare patients," Journal of Health Economics, Elsevier, vol. 84(C).
    13. Rudy Douven & Minke Remmerswaal & Tobias Vervliet, 2021. "Payment schemes and treatment responses after a demand shock in mental health care," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 2956-2973, December.
    14. Nibene H. Somé & Bernard Fortin & Bruce Shearer, 2024. "Measuring physicians' response to incentives: Labour supply, multitasking and earnings," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(2), pages 622-661, May.
    15. Bäuml, Matthias & Dette, Tilman & Pollmann, Michael, 2022. "Price and income effects of hospital reimbursements," Journal of Health Economics, Elsevier, vol. 81(C).
    16. Rong Fu & Yichen Shen & Haruko Noguchi, 2021. "The best of both worlds? The economic effects of a hybrid fee‐for‐service and prospective payment reimbursement system," Health Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 505-524, March.
    17. Rossella Verzulli & Gianluca Fiorentini & Matteo Lippi Bruni & Cristina Ugolini, 2017. "Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1429-1446, November.
    18. Diane Alexander, 2015. "Does Physician Pay Affect Procedure Choice and Patient Health? Evidence from Medicaid C-section Use," Working Paper Series WP-2017-7, Federal Reserve Bank of Chicago.
    19. Currie, Janet & Lin, Wanchuan & Zhang, Wei, 2011. "Patient knowledge and antibiotic abuse: Evidence from an audit study in China," Journal of Health Economics, Elsevier, vol. 30(5), pages 933-949.
    20. Christopher S. Brunt, 2015. "Medicare Part B Intensity and Volume Offset," Health Economics, John Wiley & Sons, Ltd., vol. 24(8), pages 1009-1026, August.

    More about this item

    Keywords

    government expenditures and health; hospital care; procurement;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:yor:hectdg:18/25. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jane Rawlings (email available below). General contact details of provider: https://edirc.repec.org/data/deyoruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.