Working Paper: NBER ID: w11087
Authors: Robert Town; Douglas Wholey; Roger Feldman; Lawton R. Burns
Abstract: During the 1990s US healthcare markets underwent a significant transformation. Managed care rose to become the dominant form of insurance in the private sector. Also, a wave of hospital consolidation occurred. In 1990, the mean population-weighted hospital Herfindahl-Hirschman Index (HHI) in a Health Services Area (HSA) was .19. By 2000, the HHI had risen to .26. This paper explores whether the rise in managed care caused the increase in hospital concentration. We use an instrumental variables approach with 10-year differences to identify the relationship between managed care penetration and hospital consolidation. Our results strongly imply that the rise of managed care did not cause the hospital consolidation wave. This finding is robust to a number of different specifications.
Keywords: managed care; hospital consolidation; healthcare markets
JEL Codes: I110; L120
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Managed care penetration (I11) | Hospital consolidation (G34) |
| Managed care penetration (I11) | Hospital concentration (I11) |
| Excess capacity (beds per capita) (E22) | Hospital consolidation (G34) |