Competition among Hospitals
AbstractWe 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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Bibliographic InfoPaper provided by Department of Economics, University of Bristol, UK in its series The Centre for Market and Public Organisation with number 03/087.
Length: 44 pages
Date of creation: Jul 2003
Date of revision:
analysis of health care markets;
Other versions of this item:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-02 (All new papers)
- NEP-COM-2003-11-03 (Industrial Competition)
- NEP-HEA-2004-07-11 (Health Economics)
- NEP-IND-2004-07-26 (Industrial Organization)
- NEP-MFD-2003-11-03 (Microfinance)
- NEP-URE-2003-11-03 (Urban & Real Estate Economics)
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