The Changing Effects of Competition on Non-Profit and For-Profit Hospital Pricing Behavior

Published In: Journal of Health Economics, v. 18, no. 1, p. 69-86, Jan. 1999

Posted on RAND.org on January 01, 1999

by Emmett B. Keeler, Glenn Melnick, Jack Zwanziger

Has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payors? This paper uses time-series cross-sectional methods on California hospital discharge data from 1986-1994 to show the association of hospital prices with measures of market concentration changed steadily over this period, with prices now higher in less competitive areas, even for non-profit hospitals. Regression results are used to simulate the price impact of hypothetical hospital mergers.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.