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.

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