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A Bargain at Twice the Price? California Hospital Prices in the New Millennium

In: Frontiers in Health Policy Research, volume 12

Author

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  • Yaa Akosa Antwi
  • Martin S. Gaynor
  • William B. Vogt
Abstract
We use data from California to document and offer possible explanations for the sharp increase in hospital prices charged to private payers after 1999. We find a downward trend in price for private pay patients in the 1990s and a rapid upward trend beginning in 1999, amounting to an annual average increase of 10.6% per year over 1999-2005. Prices in 2006 were almost double prices in 1999. By contrast, there was little discernable trend in prices for Medicare and Medicaid patients, although these prices varied from year-to-year. Surprisingly, the increase in prices is not correlated, geographically, with the change in hospital market concentration. For example, the greatest price rises came from hospitals in monopoly and highly concentrated counties which experienced little or no change over our sample period. Two recent California state hospital regulations, the seismic retrofit mandate and the mandatory nurse staffing ratio affected hospital costs. However, the cost increases due to the nursing staffing regulations are not large enough to account for the price increase, and the price increase is not substantially correlated with the costs of compliance with the seismic retrofit mandate. Therefore, the source of the near-doubling of California hospital prices remains something of a mystery.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Yaa Akosa Antwi & Martin S. Gaynor & William B. Vogt, 2009. "A Bargain at Twice the Price? California Hospital Prices in the New Millennium," NBER Chapters, in: Frontiers in Health Policy Research, volume 12, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:12338
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    1. repec:mpr:mprres:3871 is not listed on IDEAS
    2. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 577-615.
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    9. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
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    13. Daniel P. Kessler & Jeffrey J. Geppert, 2005. "The Effects of Competition on Variation in the Quality and Cost of Medical Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 575-589, September.
    14. Dranove, David & Lindrooth, Richard & White, William D. & Zwanziger, Jack, 2008. "Is the impact of managed care on hospital prices decreasing?," Journal of Health Economics, Elsevier, vol. 27(2), pages 362-376, March.
    15. Laurence C. Baker & Martin L. Brown, 1999. "Managed Care, Consolidation Among Health Care Providers, and Health Care: Evidence from Mammography," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 351-374, Summer.
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    Cited by:

    1. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    2. Anne‐Fleur Roos & Ramsis R. Croes & Victoria Shestalova & Marco Varkevisser & Frederik T. Schut, 2019. "Price effects of a hospital merger: Heterogeneity across health insurers, hospital products, and hospital locations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1130-1145, September.
    3. Laurence C. Baker & M. Kate Bundorf & Anne Royalty, 2016. "Measuring Physician Practice Competition Using Medicare Data," NBER Chapters, in: Measuring and Modeling Health Care Costs, pages 351-377, National Bureau of Economic Research, Inc.

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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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