| Abstract: |
Many health insurance plans in the U.S. restrict enrollees to choose from a
set of providers the insurer has contracted with. These provider networks are
formed via bilateral bargaining between insurers and providers. Provider
networks are an important tool for product differentiation and cost
containment for insurers and also put real restrictions on consumers’ choice
of providers. In this paper, I analyze matching between insurers offering
Medicare Advantage Plans and physicians, using a unique data set consisting of
all insurer-physician links in several counties. I estimate parameters of a
two-sided, many-to-many matching model which describes formation of provider
networks, using the Maximum Score estimator of Fox (2010). This method uses
implications of a pairwise stability condition to estimate a joint surplus
function which depends on insurer-physician links. The surplus function
accounts for the role of physician and insurer characteristics in determining
their match values, and also for interactions between physicians linked to the
same insurer, whose services may be complements or substitutes. The results
indicate that insurers prefer on the margin to link with physicians who
increase the specialty concentration of their network and who are located near
other physicians in the network. Physicians are negatively affected by having
a broader referral network,as defined by having a larger set of physicians
with whom they have insurer links in common. Finally, compared with regional
insurers, nationally active insurers benefit more from matching with
physicians with U.S. medical degree. Preliminary counterfactual analyses
suggest that insurers and physicians would be collectively better off if all
physicians were matched to all insurers– that is, if selective contracting
were eliminated entirely. |