The Dartmouth Institute for
Health Policy and Clinical Practice
Geisel School of Medicine
1 Medical Center Dr.
NBER Working Papers and Publications
|November 2016||Hospital Competition, Quality, and Expenditures in the U.S. Medicare Population|
with Carrie Colla, Andrea Austin, Jonathan Skinner: w22826
Theoretical models of competition with fixed prices suggest that hospitals should compete by increasing quality of care for diseases with the greatest profitability and demand elasticity. Most empirical evidence regarding hospital competition is limited to heart attacks, which in the U.S. generate positive profit margins but exhibit very low demand elasticity – ambulances usually take patients to the closest (or affiliated) hospital. In this paper, we derive a theoretically appropriate measure of market concentration in a fixed-price model, and use differential travel-time to hospitals in each of the 306 U.S. regional hospital markets to instrument for market concentration. We then estimate the model using risk-adjusted Medicare data for several different population cohorts: heart attacks...