TY  - JOUR
AU  - Gowrisankaran,Gautam
AU  - Town,Robert
TI  - Competition, Payer, and Hospital Quality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 9206
PY  - 2002
Y2  - September 2002
UR  - http://www.nber.org/papers/w9206
L1  - http://www.nber.org/papers/w9206.pdf
N1  - Author contact info:
Gautam Gowrisankaran
Department of Economics
University of Arizona
P.O. Box 210108
Tucson, AZ 85721-0108
Tel: 520/621-2529
Fax: 520/621-8450
E-Mail: gowrisankaran@eller.arizona.edu

Robert Town
Health Care Management Department
The Wharton School
University of Pennsylvania
3641 Locust Walk
Philadelphia, PA 19104
E-Mail: rtown@wharton.upenn.edu
AB  - The objective of this study is to estimate the effects of competition for both Medicare and HMO patients on the quality decisions of hospitals in Southern California. We use discharge data from the State of California for the period 1989-1993. The outcome variables are the risk-adjusted hospital mortality rates for pneumonia (estimated by the authors) and acute myocardial infarction (reported by the state of California). Measures of competition are constructed for each hospital and payer type. The competition measures are formulated to mitigate the possibility of endogeneity bias. The study finds that increases in the degree of competition for HMO patients decrease risk-adjusted hospital mortality rates. Conversely, increases in competition for Medicare enrollees are associated with increases in risk-adjusted mortality rates for hospitals. In conjunction with previous research, the estimates indicate that increasing competition for HMO patients appears to reduce prices and save lives and hence appears to improve welfare.  However, increases in competition for Medicare appear to reduce quality and may reduce welfare. Increasing competition has little net effect on hospital quality for our sample.
ER  -