Financial Incentives and Competitive Pressure: The Case of the Hospital Industry

72 Pages Posted: 29 Jan 2020

See all articles by Philippe Choné

Philippe Choné

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); CESifo (Center for Economic Studies and Ifo Institute)

Lionel Wilner

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: January 2020

Abstract

In the late 2000s, a regulatory reform dramatically strengthened the incentives of French nonprofit hospitals to attract patients. Exploiting exhaustive data for surgery treatments and modeling hospitals as supplying utility to patients, we show that increased competitive pressure on nonprofit hospitals caused them to perform more procedures but did not inflate overall activity. Although they have gained market shares, nonprofit hospitals have been significantly worse off after the reform. To adjust to stronger financial incentives, they incurred an additional effort (pecuniary and non-pecuniary costs) equivalent to about a quarter of their annual revenue.

JEL Classification: D22, I11, L13

Suggested Citation

Choné, Philippe and Wilner, Lionel, Financial Incentives and Competitive Pressure: The Case of the Hospital Industry (January 2020). CEPR Discussion Paper No. DP14328, Available at SSRN: https://ssrn.com/abstract=3526053

Philippe Choné (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Lionel Wilner

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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