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Does a hospitals quality depend on the quality of other hospitals? A spatial econometrics approach to investigating hospital quality competition

  • Hugh Gravelle

    (Centre for Health Economics, University of York, UK)

  • Rita Santos

    (Centre for Health Economics, University of York, UK)

  • Luigi Siciliani

    (Centre for Health Economics and Department of Economics & Related Studies, University of York, UK)

We examine whether a hospitals quality is affected by the quality provided by other hospitals in the same market. We first set out a theoretical model with regulated prices which specifies conditions on demand and cost functions which determine whether a hospital will have higher quality when its rivals have higher quality. We then apply spatial econometric methods to a sample of English hospitals in 2009-10 and a set of 16 quality measures including mortality rates, readmission, revision and redo rates and three patient reported indicators to examine to examine the relationship between the quality of hospitals. We find that a hospitals quality is positively associated with the quality of its rivals for seven out of the sixteen quality measures and that in no case is there a negative association. In those cases where there is a positive association, an increase in rivals quality by 10% increases a hospitals quality by 1.7% to 2.9%.

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Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 082cherp.

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Length: 33 pages
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:chy:respap:82cherp
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  1. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2011. "Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms," Economic Journal, Royal Economic Society, vol. 121(554), pages F228-F260, 08.
  2. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2009. "Hospital Competition and Quality with Regulated Prices," CESifo Working Paper Series 2635, CESifo Group Munich.
  3. Gaynor, Martin & Moreno-Serra, Rodrigo & Propper, Carol, 2011. "Death by Market Power: Reform, Competition and Patient Outcomes in the National Health Service," CEPR Discussion Papers 8203, C.E.P.R. Discussion Papers.
  4. Mobley, Lee R & Frech, Ted E & Anselin, Luc, 2008. "Spatial Interaction, Spatial Multipliers, and Hospital Competition," University of California at Santa Barbara, Economics Working Paper Series qt4m8862hd, Department of Economics, UC Santa Barbara.
  5. Martin Gaynor & Robert J. Town, 2011. "Competition in Health Care Markets," NBER Working Papers 17208, National Bureau of Economic Research, Inc.
  6. Hugh Gravelle & Peter Sivey, 2009. "Imperfect Quality Information in a Quality-Competitive Hospital Market," Melbourne Institute Working Paper Series wp2009n05, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  7. Nazmi Sari, 2002. "Do competition and managed care improve quality?," Health Economics, John Wiley & Sons, Ltd., vol. 11(7), pages 571-584.
  8. Ching-to Ma & James Burgess, 1993. "Quality competition, welfare, and regulation," Journal of Economics, Springer, vol. 58(2), pages 153-173, June.
  9. Mobley, Lee R., 2003. "Estimating hospital market pricing: an equilibrium approach using spatial econometrics," Regional Science and Urban Economics, Elsevier, vol. 33(4), pages 489-516, July.
  10. Hugh Gravelle & Rita Santos & Luigi Siciliani & Rosalind Goudie, 2012. "Hospital Quality Competition Under Fixed Prices," Working Papers 080cherp, Centre for Health Economics, University of York.
  11. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 577-615.
  12. Martin Gaynor, 2006. "What Do We know About Competition and Quality in Health Care Markets?," The Centre for Market and Public Organisation 06/151, Department of Economics, University of Bristol, UK.
  13. Burns, Lawton R. & Wholey, Douglas R., 1992. "The impact of physician characteristics in conditional choice models for hospital care," Journal of Health Economics, Elsevier, vol. 11(1), pages 43-62, May.
  14. Shen, Yu-Chu, 2003. "The effect of financial pressure on the quality of care in hospitals," Journal of Health Economics, Elsevier, vol. 22(2), pages 243-269, March.
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