Working Paper: NBER ID: w9206
Authors: Gautam Gowrisankaran; Robert Town
Abstract: The objective of this study is to estimate the effects of competition for both Medicare and HMO patients on the quality decisions of hospitals in Southern California. We use discharge data from the State of California for the period 1989-1993. The outcome variables are the risk-adjusted hospital mortality rates for pneumonia (estimated by the authors) and acute myocardial infarction (reported by the state of California). Measures of competition are constructed for each hospital and payer type. The competition measures are formulated to mitigate the possibility of endogeneity bias. The study finds that increases in the degree of competition for HMO patients decrease risk-adjusted hospital mortality rates. Conversely, increases in competition for Medicare enrollees are associated with increases in risk-adjusted mortality rates for hospitals. In conjunction with previous research, the estimates indicate that increasing competition for HMO patients appears to reduce prices and save lives and hence appears to improve welfare. However, increases in competition for Medicare appear to reduce quality and may reduce welfare. Increasing competition has little net effect on hospital quality for our sample.
Keywords: No keywords provided
JEL Codes: I11; L1; L4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increases in competition for HMO patients (I11) | Decrease in risk-adjusted hospital mortality rates (I14) |
| Increases in competition for medicare enrollees (I11) | Increases in risk-adjusted mortality rates (C41) |
| Increases in competition for HMO patients (I11) | Increased quality of care (I11) |
| Increases in competition for medicare enrollees (I11) | Decrease in quality of care (I14) |
| Competition for HMO patients (I11) | Quality outcomes (I14) |
| Competition for medicare patients (I11) | Quality outcomes (I14) |