Do Physicians Possess Market Power?
We study the degree to which greater physician concentration leads to higher service prices charged by physicians in the commercially insured medical care market. Using a database of physicians throughout the United States, we construct physician-firm concentration measures based on market boundaries defined by fixed driving times, which we label the fixed-travel-time Herfindahl-Hirschman index. We link these concentration measures to health insurance claims. We find that physicians in more concentrated markets charge higher service prices; a physician in the 90th percentile of market concentration will charge 14–30 percent higher fees than a physician in the 10th percentile. Our estimates imply that physician consolidation has caused about an 8 percent increase in fees on average over the last 20 years and substantially higher increases in concentrated markets.
Dunn, Abe and Shapiro, Adam Hale
"Do Physicians Possess Market Power?,"
Journal of Law and Economics: Vol. 57:
1, Article 6.
Available at: https://chicagounbound.uchicago.edu/jle/vol57/iss1/6