Competition, payers, and hospital quality.
OBJECTIVE
To estimate the effects of competition for both Medicare and HMO patients on the quality decisions of hospitals in Southern California.


METHODS
Secondary discharge data from the Office of Statewide Health Planning and Development for the State of California for the period 1989-1993.


METHODS
Outcome variables are the risk-adjusted hospital mortality rates for pneumonia (estimated by the authors) and acute myocardial infarction (AMI) (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 relationships between risk-adjusted mortality and the different competition measures are estimated using ordinary least squares.


RESULTS
The study finds that an increase in the degree of competition for health maintenance organization (HMO) patients is associated with a decrease in risk-adjusted hospital mortality rates. Conversely, an increase in competition for Medicare enrollees is associated with an increase in risk-adjusted mortality rates for hospitals.


CONCLUSIONS
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 in our sample.
Gozvrisankaran
Gautam
G
Town
Robert J
RJ
D002140:California / Q000453:epidemiology; D004465:Economic Competition / Q000706:statistics & numerical data*; D006279:Health Maintenance Organizations / Q000191:economics* / Q000592:standards*; D006302:Health Services Research; D017052:Hospital Mortality; D006761:Hospitals / Q000592:standards*; D006801:Humans; D006278:Medicare / Q000592:standards; D009203:Myocardial Infarction / Q000401:mortality; D011014:Pneumonia / Q000401:mortality; D019984:Quality Indicators, Health Care; D020379:Risk Adjustment