The Ambiguous Effect of GP Competition: The Case of Hospital Admissions

In the theoretical literature on general practitioner (GP) behaviour, one prediction is that intensified competition induces GPs to provide more services resulting in fewer hospital admissions. This potential substitution effect has drawn political attention in countries looking for measures to reduce the growth in demand for hospital care. However, intensified competition may induce GPs to secure hospital admissions a signal to attract new patients and to keep the already enlisted ones satisfied, resulting in higher admission rates at hospitals. Using both static and dynamic panel data models, we aim to enhance the understanding of whether such relations are causal. Results based on ordinary least square (OLS) models indicate that aggregate inpatient admissions are negatively associated with intensified competition both in the full sample and for the sub‐sample patients aged 45 to 69, while outpatient admissions are positively associated. Fixed‐effect estimations do not confirm these results though. However, estimations of dynamic models show significant negative (positive) effects of GP competition on aggregate inpatient (outpatient) admissions in the full sample and negative effects on aggregate inpatient admissions and emergency admissions for the sub‐sample. Thus, intensified GP competition may reduce inpatient hospital admissions by inducing GPs to provide more services, whereas, the alternative hypothesis seems valid for outpatient admissions. © 2016 The Authors. Health Economics Published by John Wiley & Sons, Ltd.