Young GJ, Desai K; Association for Health Services Research. Meeting.
Abstr Book Assoc Health Serv Res Meet. 1999; 16: 296-7.
Boston University and U.S. Department of Veterans Affairs, Boston MA 02116, USA.
RESEARCH OBJECTIVE: The growing number of mergers between nonprofit hospitals has stimulated much interest among policy makers and antitrust regulators regarding whether nonprofit hospitals are likely to exploit market power in the form of higher prices. According to a leading theoretical perspective on this debate, nonprofit hospitals will not exploit market power because the traditional governance structure of these institutions vests control in community representatives who will resist such behavior. We compared relationships between price and market concentration among three types of nonprofit hospitals that are likely to vary substantially in terms of local community control: independent hospitals (high control), hospitals participating in local hospital systems (moderate control), and hospitals particapating in national/regional systems (low community control). STUDY DESIGN: We used a panel study design. The sample consisted of all nonprofit hospitals in California between 1990 and 1995. The primary source of data was hospital cost reports made available from California's Office of Statewide Health Planning and Development. Additional data were obtained from the American Hospital Association (AHA) annual survey of hospitals, the AHA guide to Multihospital systems, and the 1990 Census and the County and City Data Base. We measured hospital price as net inpatient revenue per hospital discharge for private payers. We defined a unique market for each hospital based on all zip codes existing within a specified distance of the index hospital (15-mile radius for most urban hospitals; 30-mile radius for rural hospitals). We used the Herfindahl index to assess market concentration. Since we focused on annual price changes rather than on price levels, each hospital served as its own control (and thus biases due to omitted market-level variables were minimized). We estimated a regression model (using both ordinary and generalized least squares) in which price was regressed on HHI, type of hospital (e.g., local system member), and interaction terms for type of hospital and HHI (national/regional system members were the reference). We also accounted for changes in hospital operating (i.e., case mix and market characteristics (median income in market area). PRINCIPAL FINDINGS: The HHI was statistically significant and positive, indicating that nonprofit hospitals have higher prices in less concentrated markets. The interaction terms, independent hospitals and HHI, and local system members and HHI were statistically significant and negative, indicating that hospitals participating in national/regional systems raise their prices at a faster rate in the present of market power than do the other types of nonprofit hospitals. CONNCLUSION: Study results indicate that in price competitive environments (such as exists in California) nonprofit hospitals to exploit market power in the form of higher prices. The antitrust risks may be greatest when one or both merger participants belong to a national/regional hospital system. The results militate in favor of applying traditional antitrust analysis to mergers between nonprofit hospitals.
Publication Types:
Keywords:
- American Hospital Association
- California
- Hospital Costs
- Hospitals
- Hospitals, Rural
- Longitudinal Studies
- Multi-Institutional Systems
- economics
- hsrmtgs
Other ID:
UI: 102184913
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