Hospital Transaction Prices and Managed-Care Discounting for Selected Medical Technologies

It is generally assumed that managed care has been successful at capturing discounts from medical providers, but the implications have been a matter of debate. Critics argue that managed-care organizations attain savings by reducing intensity of services, while others have argued that savings are "real" and are a consequence of discounts per unit of care rather than reduced intensity. Because medical services tend to be bundled together into episodes of care, separating out prices and quantities can be difficult. This paper employes data that enables the observation of transaction prices for major procedures on an unbundled basis.