Competition, Payer, and Hospital Quality
AbstractThe objective of this study is to estimate the effects of competition for both Medicare and HMO patients on the quality decisions of hospitals in Southern California. We use discharge data from the State of California for the period 1989-1993. The outcome variables are the risk-adjusted hospital mortality rates for pneumonia (estimated by the authors) and acute myocardial infarction (reported by the state of California). Measures of competition are constructed for each hospital and payer type. The competition measures are formulated to mitigate the possibility of endogeneity bias. The study finds that increases in the degree of competition for HMO patients decrease risk-adjusted hospital mortality rates. Conversely, increases in competition for Medicare enrollees are associated with increases in risk-adjusted mortality rates for hospitals. In conjunction with previous research, the estimates indicate that increasing competition for HMO patients appears to reduce prices and save lives and hence appears to improve welfare. However, increases in competition for Medicare appear to reduce quality and may reduce welfare. Increasing competition has little net effect on hospital quality for our sample.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9206.
Date of creation: Sep 2002
Date of revision:
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Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-09-28 (All new papers)
- NEP-HEA-2002-09-28 (Health Economics)
- NEP-MIC-2002-10-10 (Microeconomics)
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