Three Essays on Health Care Utilization, Governance and Provider Reimbursement in Urban China

The first essay uses a model of profit-maximizing hospitals to examine hospital responses to global budgeting in the forms of dumping and cost shifting. The main findings include: (1) Hospitals dump insured patients when the covered services are priced under costs. Whetherthe budget target is binding depends on its size relative to the mandated fees and productioncosts of insured services. (2) Only when hospitals operate at full capacity and the uninsured patients have inelastic demand do providers shift costs to the uninsured. (3) When revenue shocks dominate, cost shifting lowers the income from the insured while increasing that fromthe uninsured patients. When cost shocks dominate, incomes from the two groups may bepositively correlated.In the second essay, I use insurance claims data in a difference-in-differences model toempirically investigate the effects of global budgeting on providers' selection and skimpingagainst high-cost patients in China. It finds that non-last resort (LR) hospitals respond toglobal budgeting by avoiding unprofitable patients as well as selectively reducing the intensity of their treatment. Interestingly, I did not find evidence of skimping for LR providers. This indicates that non-LR hospitals achieve at least part of the adverse selection by making services inadequate for high-cost patients.In the third essay, we use survey data in an endogenous switching regression model toanalyze the price gap between state and private hospitals in China. Our analysis finds strongevidence that outpatient care is not only much more expensive at the public sector, but moreexpensive to a greater extent for certain disadvantaged social groups than for the generalpopulation. We explain this finding by noting that the private sector can price discriminatewith greater ¡ãexibility than the tightly regulated public sector. We also find that the bigger the share of physicians working in the private sector, the lower the public-private price gap as well as the overall average price. These results indicate that increasing competition in the market for physicians may significantly lower the price of health care by enabling private providers to enhance their reputation through attracting well-trained physicians.