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Competition among Hospitals

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Author Info
Martin Gaynor
William B Vogt ()

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Abstract

We examine competition in the hospital industry, in particular the effect of ownership type (for-profit, no-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 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-profits.

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Publisher Info
Paper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 03/087.

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Length: 44 pages
Date of creation: Jul 2003
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Handle: RePEc:bri:cmpowp:03/087

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Related research
Keywords: analysis of health care markets

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Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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  1. 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!]
  2. 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)
  3. 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:
  4. Pierre Koning & Joëlle Noailly & Sabine Visser, 2007. "Do non-profits make a difference?," CPB Documents 142, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  5. 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!]
  6. 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:
  7. 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)
  8. 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!]
  9. 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)
  10. 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)
  11. 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)
  12. 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:
  13. 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)
  14. 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!]
  15. 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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