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Managed Care, Distance Traveled, and Hospital Market Definition

Abstract

Most scholars and antitrust cases have defined hospital service markets as primarily local. But, two recent decisions have greatly expanded geographic markets, incorporating hospitals as far as 100 miles apart. Managed care plans, now important in most markets, were believed to shift patients to distant hospitals to capture lower prices. We examine distance traveled and its connection to managed care penetration. In contrast to earlier literature, we examine both direct and indirect effects. We find that increases in managed care have impacted distances traveled, but these effects are too small to justify much change in geographical markets for research or antitrust law.

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