Inquiry J Health Car
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Inquiry J Health Car · Jan 1986
The effect of injecting price competition into the hospital market: the case of preferred provider organizations.
Preferred provider organizations (PPOs) and other discount health care purchasers are injecting price competition into the hospital market, which has hitherto been insulated from price competition by comprehensive and generous insurance coverage. Providing the discounts demanded by PPOs thus poses unaccustomed and difficult problems for hospitals. ⋯ We predict that prices will fall, excess capacity will be reduced, and some hospitals may develop financial problems. In the extreme case, prices will fall substantially, some hospitals will go bankrupt, excess capacity will be eliminated, and an unprecedented price volatility will be introduced into the market.