Working Paper: NBER ID: w30425
Authors: Ian McCarthy; Mehul V. Raval
Abstract: Specialty hospitals tend to negotiate higher commercial insurance payments, even for relatively routine procedures with comparable clinical quality across hospital types. How specialty hospitals can maintain such a price premium remains an open question. In this paper, we examine a potential (horizontal) differentiation effect in which patients perceive specialty hospitals as sufficiently distinct from other hospitals, so that specialty hospitals effectively compete in a separate market from general acute care hospitals. We estimate this effect in the context of routine pediatric procedures offered by both specialty children’s hospitals as well as general acute care hospitals, and we find strong empirical evidence of a differentiation effect in which specialty children’s hospitals appear largely immune to competitive forces from non-children’s hospitals.
Keywords: No keywords provided
JEL Codes: I11; I15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Entry of new CH (Y20) | Decrease in incumbent CH prices (D49) |
| Entry of new CH (Y20) | No significant effect on NCH prices (D49) |
| CH are able to negotiate higher commercial insurance payments (I11) | Price premium for CH (D49) |
| No discernible clinical quality advantage (L15) | Price premium for CH (D49) |