Hospital choices, hospital prices, and financial incentives to physicians?

Kate Ho, Ariel Pakes

Research output: Contribution to journalArticlepeer-review

65 Scopus citations


We estimate an insurer-specific preference function which rationalizes hospital referrals for privately insured births in California. The function is additively separable in: a hospital price paid by the insurer, the distance traveled, and plan- and severity-specific hospital fixed effects (capturing hospital quality). We use an inequality estimator that allows for errors in price and detailed hospital-severity interactions and obtain markedly different results than those from a logit. The estimates indicate that insurers with more capitated physicians are more responsive to price. Capitated plans send patients further to utilize similar quality, lower-priced hospitals; but the cost-quality trade-off does not vary with capitation rates.

Original languageEnglish (US)
Pages (from-to)3814-3840
Number of pages27
JournalAmerican Economic Review
Issue number12
StatePublished - Dec 1 2014
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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