Competition among Hospitals

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Competition among Hospitals

Author Info

Gaynor, Martin
Vogt, William B

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Abstract

We examine competition in the hospital industry, in particular the effect of ownership type (for-profit, not-for-profit, government). We estimate a structural model of demand and pricing in the hospital industry in California, then use the estimates to simulate the effect of a merger. California hospitals in 1995 face an average price elasticity of demand of -4.85. Not-for-profit hospitals face less elastic demand and act as if they have lower marginal costs. Their prices are lower than those of for-profits, but markups are higher. We simulate the effects of the 1997 merger of two hospital chains. In San Luis Obispo County, where the merger creates a near monopoly, prices rise by up to 53%, and the predicted price increase would not be substantially smaller were the chains not-for-profit. Copyright 2003 by the RAND Corporation.

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Publisher Info
Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 34 (2003)
Issue (Month): 4 (Winter)
Pages: 764-85
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Handle: RePEc:rje:randje:v:34:y:2003:i:4:p:764-85

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Paper
- Martin Gaynor & William Vogt, 2002. "Competition Among Hospitals," GSIA Working Papers 2003-E20, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
- Martin Gaynor & William B Vogt, 2003. "Competition among Hospitals," The Centre for Market and Public Organisation 03/087, Department of Economics, University of Bristol, UK. [Downloadable!]
- Martin Gaynor & William B. Vogt, 2003. "Competition Among Hospitals," NBER Working Papers 9471, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

Cited by:
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Jill R. Horwitz & Austin Nichols, 2007. "What Do Nonprofits Maximize? Nonprofit Hospital Service Provision and Market Ownership Mix," NBER Working Papers 13246, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Teresa Harrison & Kristina Lybecker, 2005. "The Effect of the Nonprofit Motive on Hospital Competitive Behavior," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 4(1), pages 1368-1368. [Downloadable!] (restricted)
John A. Romley & Dana Goldman, 2008. "How Costly Is Hospital Quality? A Revealed-Preference Approach," NBER Working Papers 13730, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Hirsch, Barry T. & Schumacher, Edward J., 2004. "Classic Monopsony or New Monopsony? Searching for Evidence in Nursing Labor Markets," IZA Discussion Papers 1154, Institute for the Study of Labor (IZA). [Downloadable!]
Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2006. "Does the profit motive make Jack nimble? Ownership form and the evolution of the US hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 15(4), pages 345-361. [Downloadable!]
Other versions:
- Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2005. "Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry," NBER Working Papers 11705, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2005. "Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry," GSIA Working Papers 2005-E55, Carnegie Mellon University, Tepper School of Business. [Downloadable!]
Andrew M. Cohen & Beth A. Freeborn & Brian McManus, 2007. "Competition and Crowding-Out among Public, Non-Profit and For-Profit Organizations: Evidence from Outpatient Substance Abuse Treatment," Working Papers 52, Department of Economics, College of William and Mary. [Downloadable!]
Pierre Koning & Joëlle Noailly & Sabine Visser, 2007. "Do non-profits make a difference?," CPB Documents 142, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
Tomas J. Philipson & Richard A. Posner, 2006. "Antitrust in the Not-For-Profit Sector," NBER Working Papers 12132, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- Tomas J. Philipson & Richard A. Posner, 2001. "Antitrust and the Not-For-Profit Sector," NBER Working Papers 8126, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Robert Town & Douglas Wholey & Roger Feldman & Lawton R. Burns, 2006. "The Welfare Consequences of Hospital Mergers," NBER Working Papers 12244, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Rossella Levaggi & Michele Moretto, 2007. "Investment in hospital care technology under different purchasing rules: a real option approach," "Marco Fanno" Working Papers 0046, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
Other versions:
- Michele Moretto & Rosella Levaggi, 2004. "Investment in Hospital Care Technology under Different Purchasing Rules: A Real Option Approach," Working Papers 2004.75, Fondazione Eni Enrico Mattei. [Downloadable!]
- Rosella Levaggi & Moretto Michele, 2008. "Investment In Hospital Care Technology Under Different Purchasing Rules: A Real Option Approach," Bulletin of Economic Research, Blackwell Publishing, vol. 60(2), pages 159-181, 04. [Downloadable!] (restricted)
Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079. [Downloadable!]
Teresa D. Harrison, 2006. "Hospital mergers: who merges with whom?," Applied Economics, Taylor and Francis Journals, vol. 38(6), pages 637-647, April. [Downloadable!] (restricted)
Leemore S. Dafny, 2005. "Estimation and Identification of Merger Effects: An Application to Hospital Mergers," NBER Working Papers 11673, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Boris Augurzky & Dirk Engel & Christoph Schwierz, 2006. "Who gets the Credit? Determinants of the Probability of Default in the German Hospital Sector," RWI Discussion Papers 0054, Rheinisch-Westfälisches Institut für Wirtschaftsforschung. [Downloadable!]
Katherine Ho, 2005. "The Welfare Effects of Restricted Hospital Choice in the US Medical Care Market," NBER Working Papers 11819, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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