Managed care, distance traveled, and hospital market definition

Does managed care insurance require patients to travel farther to receive hospital care? This question has major implications for antitrust policy and access to care. In spite of a general presumption that the answer is "yes," the question cannot be settled by a priori reasoning. Managed care has two effects on distance: 1) the direct effect of steering managed care consumers to particular hospitals, and 2) the indirect effect of higher managed care market share changing the market environment for consumers in general. The net effect of managed care on distance traveled could go either way. This paper measures both direct and indirect effects in a unique application of a spatial interaction model. We use individual discharge data, including payer information, from hospitals in 14 California counties over the period 1984-1993. We find that the direct effect leads to longer distances, but the indirect effect leads to shorter distances. Neither effect is large. Surprisingly, the net effect is slightly negative.