Research Topics

PRICING AND EFFICIENCY IN MEDICAL GROUP PRACTICE

Summary

Principal Investigator: Martin Gaynor
Abstract: This project proposes to estimate price functions for medical group practice as a test of whether productive efficiencies found to exist in group practice settings affect the prices of individual groups. The project also proposes tests for the increasing monopoly and target-income theories of physician behavior, as applied to group practice. An exposition of the theoretical aspects of the hypotheses addresses the link between productive efficiency and cost reduction, the effect of market structure on the relation between marginal cost and price, and the workings of the increasing monopoly and target-income theories. An empirical model is specified which incorporates characteristics of the individual group practice and the demand it faces. The endogeneity of certain variables (e.g. - quality, number of physicians in the community, hours worked) is discussed and single equations and simultaneous equations versions of the model are specified. The data to be used for estimation are taken from the Mathematica Policy Research Group Practice Survey, which provides the most comprehensive, detailed and accurate set of data on medical group practice currently available. Policy is discussed in the context of the claimed cost-reducing aspects of group practice. This project will provide more information on whether cost-efficiencies in group practice are passed on to consumers in the form of lower prices.
Funding Period: 1980-07-01 - 1981-08-31
more information: NIH RePORT