Kessler D & McClellan M, (2000)

‘Is hospital competition socially wasteful?’

Quarterly Journal of Economics, 115 (2): 577-616.

Empirical investigation of the effects of competition on both health care costs and patient health outcomes, using national U.S. panel data.
First paper to look at the effect of competition on both health care costs & outcomes simultaneously in order to assess social welfare.
Notes that conventional measures of competition are affected by unobserved determinants of hospital quality, and may be biased. Attempts to construct a measure of competition in hospital markets which does not suffer this problem.

Pre-1991, treatment of AMI patients in the least-competitive areas was less costly than in more-competitive areas. However, patients from less competitive areas also experienced higher mortality and cardiac complication rates. Thus the welfare implications of competition in the 1980s were ambiguous: competition increased expenditures, and led to better outcomes.
After 1991, competition was unambiguously welfare-improving. Treatment of AMI in the least competitive areas was significantly more costly than in areas with very high levels of competition, while adverse health outcomes were reduced in competitive areas.