Health care organizations have faced increasing pressure to reduce costs over the past few decades. In the early 1980s, Congress passed legislation to reimburse hospitals’ Medicare claims for certain services based on fixed prices by diagnosis rather than for the full cost of treating each patient, providing an incentive for hospitals to reduce their treatment costs (Anderson and Wootton, 1991; and Bellemore, 1998). In 1997, this payment structure was expanded to include nonacute treatment, such as home health care (McClellan, 2000). At the same time, there has been a rapid increase in the proportion of Americans who are enrolled in managed care health insurance plans, which oversee treatment decisions to control health care consumption and bargain aggressively on price with health care providers (Cutler, McClellan and Newhouse, 2000).