Using Difference in Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic

<title>Abstract</title> <italic>In calculating damages in healthcare antitrust cases, the difference-in-differences (DID) approach provides a potentially valuable means of controlling for lawful factors that influence prices, such as case mix and quality of care, as distinct from price differentials due to unlawful behavior. After comparing DID to traditional methods of estimating damages, this paper uses DID to analyze data from a well-known case against Marshfield Clinic, a large multi-specialty group practice that was found to have illegally allocated markets for physician services in Central Wisconsin. Using a specification similar to what was used in the case, we find that illegal behavior accounted for about one-half of the Clinic's extra increase in costs per patient during the damage period. The courts, however, were not persuaded that the analysis adequately controlled for legal factors. We discuss potential pitfalls in using DID to estimate damages suggested by the case, as well as possible ways around them</italic>.