Interdependence among mental health care providers: evidence from a spatial dynamic panel data model with interactive fixed effects

Understanding the pricing and operation mechanism of community mental health (CMH) providers is important for designing effective health care policies as the CMH system has been playing an essential role in providing mental health services. This paper studies the delivery of community-based mental health care and interdependence among CMH providers by investigating the pricing patterns of CMH providers in the Detroit-Wayne County of Michigan. We employ a spatial dynamic panel data model with interactive fixed effects to identify the strategic interactions among the providers, along both dimensions of time-series and cross-section spatial variations. We find evidence for significant spatial interdependence among the CMH providers, even after controlling for the interactive fixed effects. In contrast, the coefficient on the spatial-dynamic term is insignificant, suggesting that no time-space simultaneous effects exist. We also find the pure dynamic effect to be positive and significant. These findings provide important implications for mental health care policy and practice decisions.