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Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector

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

Abstract

The conventional wisdom for the health care sector is that idiosyncratic features leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence across several different conditions and performance measures that higher quality hospitals have higher market shares and grow more over time. The relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting that patient demand plays an important role in allocation. Our findings suggest that health care may have more in common with "traditional" sectors subject to market forces than often assumed.

Suggested Citation

  • Amitabh Chandra & Amy Finkelstein & Adam Sacarny & Chad Syverson, 2016. "Health Care Exceptionalism? Performance and Allocation in the US Health Care Sector," American Economic Review, American Economic Association, vol. 106(8), pages 2110-2144, August.
    • Handle: RePEc:aea:aecrev:v:106:y:2016:i:8:p:2110-44
    Note: DOI: 10.1257/aer.20151080
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    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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