Working Paper: NBER ID: w8632
Authors: Michael Chernew; Gautam Gowrisankaran; A Mark Fendrick
Abstract: In this paper we estimate the returns associated with the provision of coronary artery bypass graft (CABG) surgery, by payer type (Medicare, HMO, etc.). Because reliable measures of prices and treatment costs are often unobserved, we seek to infer returns from hospital entry behavior. We estimate a model of patient flows for CABG patients that provides inputs for an entry model. We find that FFS provides a high return throughout the study period. Medicare, which had been generous in the early 1980s, now provides a return that is close to zero. Medicaid appears to reimburse less than average variable costs. HMOs essentially pay at average variable costs, though the return varies inversely with competition.
Keywords: CABG; payer type; hospital entry behavior
JEL Codes: I11; D43; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| expected returns (G17) | hospital entry behavior (I11) |
| higher variable returns (C29) | likelihood of hospital entry into CABG market (I11) |
| FFS coverage (G52) | positive returns (G12) |
| Medicare returns (I18) | hospital entry behavior (I11) |
| Medicaid reimbursement (I18) | average variable costs (D24) |
| HMO payments (I13) | average variable costs (D24) |
| competition for CABG patients (I11) | expected patient flows by payer type (I11) |
| unobserved market traits (D52) | confounding results (C90) |