Wednesday, August 8, 2012
Using Difference-in-Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic
Posted by D. Daniel Sokol
R. Forrest McCluer Greylock McKinnon Associates and Martha A. Starr, American University are Using Difference-in-Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic.
ABSTRACT: In calculating damages in healthcare antitrust cases, the difference-in-difference (DID) approach provides a potentially valuable means of controlling for lawful factors that influence prices, such as case-mix and quality of care, as distinct from price differentials due to unlawful behavior. After first comparing DID to traditional methods of estimating damages, this paper uses DID to analyze data from a well-known case against Marshfield Clinic, a large multispecialty group practice that was found to have illegally allocated markets for physician services in Central Wisconsin. Using a specification similar to what was used in the case, we find that illegal behavior accounted for about two-fifths of the Clinic's extra increase in costs per patient during the damage period. The courts, however, were not persuaded that the analysis adequately controlled for legal factors. We discuss potential pitfalls in using DID to estimate damages suggested by the case, as well as possible ways around them.