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Is Hospital Competition Socially Wasteful?

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  • Daniel P. Kessler
  • Mark B. McClellan

Abstract

We study the consequences of hospital competition for Medicare beneficiaries' heart attack care from 1985 to 1994. We examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets, and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes. In the 1980s, the welfare effects of competition were ambiguous; but in the 1990s, competition unambiguously improves social welfare. Increasing HMO enrollment over the sample period partially explains the dramatic change in the impact of hospital competition.

Suggested Citation

  • Daniel P. Kessler & Mark B. McClellan, 1999. "Is Hospital Competition Socially Wasteful?," NBER Working Papers 7266, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:7266 Note: HC
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, vol. 52(1), pages 1-18, February.
    2. David Bardey & Giancarlo Buitrago, 2015. "Integración vertical en el sector de la salud colombiano," DOCUMENTOS CEDE 014069, UNIVERSIDAD DE LOS ANDES-CEDE.
    3. David Meltzer & Jeanette Chung, 2002. "Effects of Competition Under Prospective Payment on Hospital Costs Among High- and Low-Cost Admissions: Evidence from California, 1983 and 1993," NBER Chapters,in: Frontiers in Health Policy Research, Volume 5, pages 53-102 National Bureau of Economic Research, Inc.
    4. Sherry Glied, 2003. "Health Care Costs: On the Rise Again," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 125-148, Spring.
    5. 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.
    6. FRANCISCO MARCOS & Juan Santaló, 2007. "Tomb price discrimination in cemeteries: competition in the market for corpses?," Working Papers Economia wp07-09, Instituto de Empresa, Area of Economic Environment.
    7. Mark G. Duggan, 2000. "Hospital Ownership and Public Medical Spending," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1343-1373.
    8. Victor R. Fuchs & Mark B. McClellan & Jonathan S. Skinner, 2004. "Area Differences in Utilization of Medical Care and Mortality among U.S. Elderly," NBER Chapters,in: Perspectives on the Economics of Aging, pages 367-414 National Bureau of Economic Research, Inc.
    9. Daniel P. Kessler & Mark B. McClellan, 2000. "Medical Liability, Managed Care, and Defensive Medicine," NBER Working Papers 7537, National Bureau of Economic Research, Inc.

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