Kessler D & Geppert J, (2003)

‘The Effects of Hospital Competition on Variation in Utilization and Quality of Care’

Presented at the Agency for Healthcare Research and Quality/Federal Trade Commission. Provider Competition and Quality Conference, May 28, 2003

An investigation of the effects of hospital competition, on the variation in medical treatment and quality of care experienced by elderly Medicare beneficiaries with AMI.
Estimates the extent to which concentration has different effects on patients with prior year hospital utilisation (“sick” patients) and those without it (“healthy” patients).

Healthy patients from concentrated markets receive more intensive treatment than such patients from less concentrated markets, though without significant health benefits.
In contrast, sick patients from concentrated markets receive less intensive treatment than such patients from unconcentrated markets, and have significantly worse health outcomes.
Since this dispersion-induced increase in intensity is, on net, expenditure-reducing but outcome improving, they conclude that it is welfare-improving.
The authors’ results support strict antitrust enforcement in hospital markets. They find no evidence of a welfare downside to competition through increased wasteful treatment variation, as some theoretical models suggest.