For-Profit Status & Industry Evolution in Health Care Market: Evidence from the Dialysis Industry

Federal Trade Commission, Bureau of Economics Working Paper No. 314

49 Pages Posted: 27 Feb 2013

See all articles by Nathan Wilson

Nathan Wilson

Government of the United States of America - Federal Trade Commission, Bureau of Economics

Date Written: February 25, 2013

Abstract

Over the last 25 years, for-profit facilities have supplanted non-profits as the modal providers of hemodialysis treatment to American sufferers of end-stage renal disease. To understand what may underpin this dramatic change in industry structure, this paper uses a dynamic equilibrium model to develop intuition about how variation in different economic primitives might affect the evolution of industry structure. Subsequently, the paper exploits a comprehensive 20 year panel dataset to examine entry, exit, and output patterns in relation to changes in demand and local market structure. Examining the empirical results in light of the model's comparative statics suggests that for-profit firms enjoy a significant advantage in static competition, perhaps as a result of lower marginal costs. By comparison, I find negligible evidence that for-profit facilities have lower entry costs. Interestingly, the data also suggest that competition among dialysis clinics may be differentiated.

Keywords: dialysis, entry, market dynamics, organizational structure, for-profit status

JEL Classification: D4, I11, L10

Suggested Citation

Wilson, Nathan, For-Profit Status & Industry Evolution in Health Care Market: Evidence from the Dialysis Industry (February 25, 2013). Federal Trade Commission, Bureau of Economics Working Paper No. 314. Available at SSRN: https://ssrn.com/abstract=2224162 or http://dx.doi.org/10.2139/ssrn.2224162

Nathan Wilson (Contact Author)

Government of the United States of America - Federal Trade Commission, Bureau of Economics ( email )

600 Pennsylvania Avenue, NW
Washington, DC 20580
United States
202 326 3485 (Phone)

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