| The rapid growth of health care expenditures has been a major concern for the U.S. health care system for several decades. Various cost containment policies have been introduced to control price, volume, or both, from either the provider or consumer side. This dissertation examines key elements in understanding providers' responses to financial incentives and contractual relationships with health plans in the health care system.;The hospital industry is the largest consumer of resources for health care services and has always been the focus of cost control policy. Understanding the relationship between a hospital's behaviors and its financial condition based on ownership is crucial in constructing any cost containment policy. In Chapter 1, I construct a hospital investment decision model. The model predicts that hospitals invest asymmetrically based on the elasticity of demand with respect to quality, financial condition, and ownership structure. I test the predictions of the model using the 2005 National Inpatient Sample data and the 2000--2004 Centers for Medicare and Medicaid Services hospital cost reports data. A Seemingly Uncorrelated Regression model shows that good and bad financial performances affect the quality of hospital services asymmetrically, and the above asymmetries are observed only in investor-owned hospitals.;In Chapter 2, I examine the global budget as a payment system and as a cost containment measure in a static and a dynamic set-up. In a static model, physicians under an optimal budget cap supply higher quality than under the optimal prospective payment system. In a dynamic model, optimal dynamic budgeting gives an incentive for physicians to improve quality relative to the level under a static optimal budget. The results have important implications with respect to budget neutrality under the Medicare program.;In Chapter 3, I analyze physician fee variations, focusing on the contractual relationship between the health plans and physicians. Using data from MarketScan Research Database from 2003 to 2006, I estimate the relative effect size and explanatory power of provider type, plan type, and county on variations of physician fees adjusted by the geographic adjustment factor. |
