Revisiting the relationship between managed care and hospital consolidation.
OBJECTIVE
This paper analyzes whether the rise in managed care during the 1990s caused the increase in hospital concentration.


METHODS
We assemble data from the American Hospital Association, InterStudy and government censuses from 1990 to 2000.


METHODS
We employ linear regression analyses on long differenced data to estimate the impact of managed care penetration on hospital consolidation. Instrumental variable analogs of these regressions are also analyzed to control for potential endogeneity.


METHODS
All data are from secondary sources merged at the level of the Health Care Services Area.


RESULTS
In 1990, the mean population-weighted hospital Herfindahl-Hirschman index (HHI) in a Health Services Area was .19. By 2000, the HHI had risen to .26. Most of this increase in hospital concentration is due to hospital consolidation. Over the same time frame HMO penetration increased three fold. However, our regression analysis strongly implies that the rise of managed care did not cause the hospital consolidation wave. This finding is robust to a number of different specifications.
Town
Robert J
RJ
Division of Health Policy and Management, School of Public Health, University of Minnesota, Mayo Mail Code 729, 420 Delaware St. SE, Minneapolis, MN 55455, USA.
Wholey
Douglas
D
Feldman
Roger
R
Burns
Lawton R
LR
D000573:American Hospital Association; D004465:Economic Competition; D006273:Health Facility Merger / Q000191:economics / Q000458:organization & administration*; D006302:Health Services Research; D006739:Hospital Administration; D006801:Humans; D008329:Managed Care Programs / Q000191:economics / Q000458:organization & administration*; D012044:Regression Analysis; D014481:United States