Competition among hospitals.
We examine competition in the hospital industry, in particular the effect of ownership type (for-profit, not-for-profit, government). We estimate a structural model of demand and pricing in the hospital industry in California, then use the estimates to simulate the effect of a merger. California hospitals in 1995 face an average price elasticity of demand of -4.85. Not-for-profit hospitals face less elastic demand and act as if they have lower marginal costs. Their prices are lower than those of for-profits, but markups are higher. We simulate the effects of the 1997 merger of two hospital chains. In San Luis Obispo County, where the merger creates a near monopoly, prices rise by up to 53%, and the predicted price increase would not be substantially smaller were the chains not-for-profit.
Carnegie Mellon University and National Bureau of Economic Research, USA. mgaynor@cmu.edu.
Martin
M
Gaynor
William B
WB
Vogt
D002140:California; D004465:Economic Competition / Q000706:statistics & numerical data; D017048:Health Care Costs; D006273:Health Facility Merger; D006301:Health Services Needs and Demand; D006739:Hospital Administration / Q000706:statistics & numerical data; D006801:Humans; D017059:Models, Econometric; D017146:Models, Organizational; D010067:Ownership; D014481:United States