Pricing Coordination Failures and Health Care Provider Integration
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Karen Eggleston
The rise of managed healthcare organizations (MCOs) and the associated increased integration among providers has transformed US healthcare and at the same time raised antitrust concern. This paper examines how competition among MCOs affects the efficiency gains of improved price coordination achieved through integration. MCOs offer differentiated services and contract with specialized and complementary upstream providers to supply these services. We identify strategic pricing equilibria under three different market structures: overlapping upstream physician-hospital alliances, upstream-downstream arrangements such as Preferred Provider Organizations, and vertically integrated Health Maintenance Organizations. The efficiency gains achieved depend not only on organizational form but also on the toughness of premium competition. We show that, contrary to popular thinking, providers and insurers do not earn maximum net revenue when they are monopolies or monopsonies, but rather at an intermediate level of market power. Furthermore, closer integration of upstream and downstream providers does not necessarily increase net revenues.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Articles in the same Issue
- Contributions Article
- Contestable Licensing
- Willingness to Pay for Environmental Quality: Testable Empirical Implications of the Growth and Environment Literature
- Why Do the Poor and the Less-Educated Pay More for Long-Distance Calls?
- A Model of Welfare-Reducing Settlement
- How Does Job Loss Affect the Timing of Retirement?
- Information, the Introduction of Roths, and IRA Participation
- Willingness to Pay for Environmental Quality: Testable Empirical Implications of the Growth and Environment Literature: Comment
- Quantity Controls, License Transferability, and the Level of Investment
- Instrumental Variables for Binary Treatments with Heterogenous Treatment Effects: A Simple Exposition
- Do Parents Value Changes in Test Scores? High Stakes Testing in Texas
- Law Serials Pricing and Mergers: A Portfolio Approach
- Racial Bias in Motor Vehicle Searches: Additional Theory and Evidence
- Poverty Measurement Under Risk Aversion Using Panel Data
- Anti-trade Bias in Trade Policy and General Equilibrium
- Race and the Digital Divide
- Cost Recovery, Efficiency, and Economic Organization for Water Utilities
- A Minimum of Rivalry: Evidence from Transition Economies on the Importance of Competition for Innovation and Growth
- Selective Enforcement of Copyright as an Optimal Monopolistic Behavior
- Robin Hood's Compromise: The Economics of Moderate Land Reforms
- Pricing Coordination Failures and Health Care Provider Integration
- Access Charges in the Presence of Call Externalities
