Working Paper: NBER ID: w11226
Authors: Daniel P. Kessler; Jeffrey J. Geppert
Abstract: We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in less-competitive markets receive more intensive treatment than in more-competitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in less-competitive markets receive less intensive treatment than in more-competitive markets, and have significantly worse health outcomes. Since this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.
Keywords: hospital competition; quality of care; medical expenditures; elderly; Medicare; heart attack
JEL Codes: I1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Hirschman-Herfindahl index (HHI) (L19) | health care utilization of low-valuation patients (I11) |
| Hirschman-Herfindahl index (HHI) (L19) | health outcomes of low-valuation patients (I14) |
| Hirschman-Herfindahl index (HHI) (L19) | health care utilization of high-valuation patients (I11) |
| Hirschman-Herfindahl index (HHI) (L19) | health outcomes of high-valuation patients (I11) |
| competition (L13) | variation in expenditures (H50) |
| variation in expenditures (H50) | health outcomes for high-valuation patients (I11) |
| competition (L13) | health outcomes for high-valuation patients (I11) |
| competition (L13) | health outcomes for low-valuation patients (I14) |