Is managed care leading to consolidation in health-care markets?
OBJECTIVE
To determine the extent to which managed care has led to consolidation among hospitals and physicians.


METHODS
We use data from the American Hospital Association, American Medical Association, and government censuses.


METHODS
Two stage least squares regression analysis examines how cross-section variation in managed care penetration affects provider consolidation, while controlling for the endogeneity of managed-care penetration. Specifically, we examine inpatient hospital markets and physician practice size in large metropolitan areas.


METHODS
All data are from secondary sources, merged at the level of the Primary Metropolitan Statistical Area.


RESULTS
We find that higher levels of local managed-care penetration are associated with substantial increases in consolidation in hospital and physician markets. In the average market (managed-care penetration equaled 34 percent in 1994), managed care was associated with an increase in the Herfindahl of .054 between 1981 and 1994, moving from .096 in 1981 to .154. This is equivalent to moving from 10.4 equal-size hospitals to 6.5 equal-sized hospitals. In the physician market place, we estimate that at the mean, managed care resulted in a 14 percentage point decrease of physicians in solo practice between 1986 and 1995. This implies a decrease in the percentage of doctors in solo practice from 38 percent in 1986 to 24 percent by 1995.
Dranove
David
D
Northwestern University, Evanston, IL 60208, USA.
Simon
Carol J
CJ
White
William D
WD
D000573:American Hospital Association; D000574:American Medical Association; D019033:Delivery of Health Care, Integrated / Q000458:organization & administration* / Q000706:statistics & numerical data; D005163:Factor Analysis, Statistical; D006302:Health Services Research; D006759:Hospital-Physician Joint Ventures / Q000706:statistics & numerical data; D018578:Hospital-Physician Relations; D006786:Hospitals, Urban / Q000458:organization & administration*; D006801:Humans; D016018:Least-Squares Analysis; D008329:Managed Care Programs; D020399:Practice Management / Q000706:statistics & numerical data; D014481:United States; D014505:Urban Population