Mark V. Pauly

Mark V. Pauly (Forthcoming), Kindling Hospital Competition to Control Costs.

Abstract: This paper takes a critical look at the widespread belief that, compared to public regulation, competitive markets are increasingly less reliable as ways to limit inappropriate growth in hospital spending in the United States. Setting aside the population in rural areas and small cities where competition is very unlikely, the data presented show that the fraction of the remaining US population in larger cities exposed to competition is large, ranging from 58% to 89%. The paper then considers the remaining areas which could support competition but currently do not do so An online appendix discusses alternative measures of hospital competition. The literature on how to foster competition in such currently less competitive markets is reviewed. A combination of expanded markets and incentives for aggressive (“maverick”) and disruptive hospital pricing behavior is shown to hold the most promise for a market based solution.

Mark V. Pauly (Forthcoming), Pharmaceutical Pricing and R&D as a Global Public Good.

Abstract: This paper examines the international variation in the prices of branded pharmaceuticals. We consider short-run profits, or quasi-rents, as representing each country’s contribution toward the global public good of therapeutic information embodied in new pharmaceuticals. We characterize globally optimal contributions through the Samuelson-Lindahl criteria and contrast the resulting outcomes with the Nash noncooperative equilibrium as developed in the Olson-Zeckhauser theory of international alliances. That theory predicts both the undersupply of public goods and the “exploitation” of large countries by small ones. We calculate national contributions to the global public good with data from a recent RAND report. Other countries’ contributions resulting from their prices are much lower than those in the United States, but their free riding is not complete. We also find that country size is a powerful determinant of contributions and that larger countries contribute disproportionately more. Finally, we suggest a cooperative policy approach that would move us closer to optimality with health benefits for all countries.

Mark V. Pauly, Applied Healthcare Economics (: Cambridge University Press, 2025)

Description: A wide range of managerial challenges in healthcare, from decisions on what reimbursement levels to accept to how to deal with social determinants of health, could benefit from economic insights. This book for professionals in medical services, insurance and public healthcare emphasises intuition and common sense, making the concepts of health economics more relatable and actionable. It also challenges conventional wisdom, debunking myths and suggesting innovative solutions to industry challenges. For each problem, the book suggests actions managers should or should not take, when to seek new information, and how to interpret it. Economic analysis and research suggest novel answers to questions like whether to raise private insurer prices when Medicare cuts what it pays, when to accept a particular reimbursement offer, or how to manage patients with high-deductible insurance. The book highlights the impact on healthcare costs and efficiency of issues such as moral hazard, cost-sharing and price setting. Explains health care economics to managers and policy makers without an economics background Includes a mix of explanations of economic concepts, literature reviews, diagrams and case studies Each chapter connects the analysis to actionable strategies that work in the real world

Mark V. Pauly, Lawton R. Burns, David A. Asch, Kevin Volpp, Flaura Winston, Mary Naylor, Ralph Muller, Rachel Werner, Seemed Like a Good Idea: Alchemy versus Evidence-Based Approaches to Healthcare Management Innovation (Cambridge, UK: Cambridge University Press, 2022)

Mark V. Pauly and Lawton R. Burns, “When is Medical Care Price Transparency a Good Thing (And When Isn’t It)?”. In Advances in Health Care Management – Transforming Health: A Focus on Consumerism and Profitability, edited by Jennifer Hefner and Mona Al-Amin, (Emerald Press, 2020), pp. 75-97

Abstract: There is a widespread push by government and private payers to make the prices of health care services more transparent to consumers. The main goal is to promote more effective consumer shopping; secondary goals include promoting provider competition and reducing pricing variation. There are several headwinds opposing these efforts. One problem is that there may be several valid reasons for why price variations persist. Another is that provider (and other health care) markets are not very competitive, and sometimes widespread information about prices may make them even less so. A third is that price discrimination may be economically efficient. Any analysis of price transparency must take the specific market setting into account. This chapter analyzes markets characterized by monopolistic, oligopolistic, and competitive conditions to determine when and under what economic and managerial circumstances price transparency will be useful.

Lawton R. Burns and Mark V. Pauly (2018), Transformation of the Healthcare Industry: Curb Your Enthusiasm?, Milbank Quarterly, 96(1) (), pp. 57-109.

Philip Rea, Lawton R. Burns, Mark V. Pauly, Managing Discovery: Harnessing Creativity to Drive Biomedical Innovation (Cambridge, UK: Cambridge University Press, 2018)

Mark V. Pauly and Ashley Swanson (2017), Social Impact Bonds: New Product or New Package?, The Journal of Law, Economics, and Organization, 33 (4), pp. 718-760.

Abstract: This paper considers a relatively new form of financing for social services, the “social impact bond (SIB).” Proponents of SIBs argue that they present a solution to several problems in funding social services, including performance incentives and risk allocation. Using a simple model, we first demonstrate that, despite their apparent novelty, SIBs in concept need not produce any difference in outcome from standard financing arrangements with private nonprofit firms. We then argue that SIBs will lead to greater program success if investors’ effort responds to incentives and can positively influence outcomes, either directly (e.g., effort exerted in production) or indirectly (e.g., effort devoted to screening), but are unlikely to do so otherwise. We conclude that, as in the more general theoretical literature, the value of this particular application in terms of funding innovation will be strongly context-dependent.

Mark V. Pauly, Scott E. Harrington, Adam Leive (2015), “Sticker Shock” in Individual Insurance under Health Reform?, American Journal of Health Economics, 1 (), pp. 494-514.

Description: with Mark Pauly and Adam Leive

Howard Kunreuther and Mark V. Pauly (Work In Progress), Behavioral Economics and Insurance: Principles and Solutions.