Hospital Competition and Physician Prices (Economics, Health Care)
Custer, William Sanders
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https://hdl.handle.net/2142/70745
Description
Title
Hospital Competition and Physician Prices (Economics, Health Care)
Author(s)
Custer, William Sanders
Issue Date
1984
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, General
Abstract
This study investigates the relationship between physicians and hospitals. Physicians are modeled as purchasing hospital affiliation. The affiliation fee is in the form of donated services, restrictions on physician behavior and other means by which the physician is made to bear hospital costs. The affiliation fee increases as the hospital's quality increases. Perfectly competitive physicians offer consumers a bundled good of office and hospital characteristics. There is a market clearing hedonic price function which relates physician attributes to price. Physicians affiliate with that hospital which offers the physician his/her profit maximizing combination of affiliation fee and hospital characteristics. Competition among hospitals reduces the affiliation fee and increases hospital characteristics. This allows physicians to lower their prices, inducing consumers to enter the market which results in higher physician density.
The model is tested empirically using data collected in a survey of 1500 physicians in 1978. The price of a follow-up office visit is regressed on a set of demand variables, variables reflecting hospital and office characteristics and variables reflecting the level of competition in the hospital market. The results demonstrate that physician price is significantly related to hospital characteristics and that hospital competition lowers physician prices.
A second set of regressions on physician density confirmed the theoretical prediction that market wide hospital characteristics have a significant effect on physician density.
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