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Healthcare Exceptionalism? Performance and Allocation in the U.S. Healthcare Sector

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  • Amitabh Chandra
  • Amy Finkelstein
  • Adam Sacarny
  • Chad Syverson

Abstract

The conventional wisdom in health economics is that idiosyncratic features of the healthcare sector leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence across a variety of conditions and performance measures that higher quality hospitals tend to have higher market shares at a point in time and expand more over time. Moreover, we find that the relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting a role for patient demand in allocation in the hospital sector. Our findings suggest that the healthcare sector may have more in common with “traditional” sectors subject to standard market forces than is often assumed.

Suggested Citation

  • Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2015. "Healthcare Exceptionalism? Performance and Allocation in the U.S. Healthcare Sector," NBER Working Papers 21603, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21603
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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets

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