Is Hospital Competition Socially Wasteful?

56 Pages Posted: 13 Mar 2000 Last revised: 22 Jan 2010

See all articles by Daniel P. Kessler

Daniel P. Kessler

Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Mark B. McClellan

Brookings Institution; Council of Economic Advisors; National Bureau of Economic Research (NBER)

Date Written: July 1999

Abstract

We study the consequences of hospital competition for Medicare beneficiaries' heart attack care from 1985 to 1994. We examine how relatively exogenous determinants of hospital choice such as travel distances influence the competitiveness of hospital markets, and how hospital competition interacts with the influence of managed care organizations to affect the key determinants of social welfare expenditures on treatment and patient health outcomes. In the 1980s, the welfare effects of competition were ambiguous; but in the 1990s, competition unambiguously improves social welfare. Increasing HMO enrollment over the sample period partially explains the dramatic change in the impact of hospital competition.

Suggested Citation

Kessler, Daniel Philip and McClellan, Mark B., Is Hospital Competition Socially Wasteful? (July 1999). NBER Working Paper No. w7266. Available at SSRN: https://ssrn.com/abstract=199491

Daniel Philip Kessler (Contact Author)

Stanford Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Mark B. McClellan

Brookings Institution ( email )

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Council of Economic Advisors ( email )

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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
United States

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