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Competition and the performance of hospital markets

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Abstract

This paper explores the relationship between competition and market performance for the primarily nonprofit industry, hospital services. A theoretical framework is adopted that assumes hospitals compete for physician affiliations on the basis of hospital price and resources provided. The model indicates that monopoly power leads to higher quality-adjusted hospital prices, resulting in a reduction in the level of hospital resources consumed. This reduction can occur through admissions, patient length of stay, or resources consumed per patient-day. A regression analysis reveals that all three are reduced as market concentration increases.

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Authors and Affiliations

  1. Department of Econoaics, Wichita State University, Wichita, USA

    Philip L. Hersch

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  1. Philip L. Hersch
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I would like to acknowledge the helpful comments of Bonnld Parsons, Howard Marvel, Robert Caswell, Jeffry Netter, and an anonymous referee.

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Hersch, P.L. Competition and the performance of hospital markets. Rev Ind Organ 1, 324–341 (1984). https://doi.org/10.1007/BF02354130

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