Are Health Care Services Shoppable? Evidence from the Consumption of Lower-Limb MRI Scans

Michael Chernew, Zack Cooper, Eugene Larsen-Hallock, Fiona Scott Morton

NBER Working Paper No. 24869
Issued in July 2018, Revised in January 2019
NBER Program(s):Health Care, Industrial Organization

We study how privately insured individuals choose lower-limb MRI scan providers. Despite significant out-of-pocket costs and little variation in quality, patients often received care in high-priced locations when lower priced options were available. The choice of provider is such that, on average, patients bypassed 6 lower-priced providers between their homes and treatment locations. We show that referring physicians heavily influence where patients receive care. The influence of referring physicians is dramatically greater than the influence of patient cost-sharing or patients’ home zip code fixed effects. Patients with vertically integrated referring physicians are also more likely to receive costlier hospital-based scans.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w24869