NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Healthcare Exceptionalism? Performance and Allocation in the U.S. Healthcare Sector

Amitabh Chandra, Amy Finkelstein, Adam Sacarny, Chad Syverson

NBER Working Paper No. 21603
Issued in October 2015, Revised in October 2015
NBER Program(s):Aging, Health Care, Industrial Organization, Public Economics, Productivity, Innovation, and Entrepreneurship

The conventional wisdom in health economics is that idiosyncratic features of the healthcare sector leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence across a variety of conditions and performance measures that higher quality hospitals tend to have higher market shares at a point in time and expand more over time. Moreover, we find that the relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting a role for patient demand in allocation in the hospital sector. Our findings suggest that the healthcare sector may have more in common with “traditional” sectors subject to standard market forces than is often assumed.

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Document Object Identifier (DOI): 10.3386/w21603

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