Friday, July 20, 2012
Posted by D. Daniel Sokol
Abe Dunn and Adam Hale Shapiro (Bureau of Economic Analysis) discuss Physician Market Power and Medical-Care Expenditures.
ABSTRACT: We study the degree to which greater physician market power via consolidation leads to higher service prices in the commercially insured medical-care market. We also examine whether these potentially higher service prices translate into different levels of physician service utilization. We find that physicians in more concentrated markets charge higher service prices. However, due to the unique nature of patient cost sharing as well as the incentives of physicians, these higher prices lead to either no change or, in some cases, an expansion of services. This is in contrast to a typical market, where higher prices attributable to consolidation are thought to decrease quantity demanded.