Power in the market for Medi-Cal services

Abstract

The California Medicaid Reform Act of 1982 resulted in a shift in power from the supply to the demand side of the Medi-Cal market. We find some evidence that strategic behavior by hospitals in the subsequent period may have countered the erosion of supplier market power. This study conducts an empirical assessment of market power in markets for Medi-Cal services, in the year reforms were first implemented (1983) and six years later. Multihospital chain presence is found to have a positive and statistically significant impact on market power, and to vary by chain ownership type.