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Kessler D & McClellan M, (2000)
‘Is hospital competition socially wasteful?’
Quarterly Journal of Economics, 115 (2): 577-616.
- Empirical investigation of the effects of competition on both health
care costs and patient health outcomes, using national U.S. panel data.
- First paper to look at the effect of competition on both health care
costs & outcomes
simultaneously in order to assess social welfare.
- Notes
that conventional measures of competition are affected by unobserved
determinants of hospital quality, and may be biased. Attempts to construct
a measure of competition in hospital markets which does not suffer this
problem.
Key results:
- Pre-1991, treatment of AMI patients in the least-competitive areas
was less costly than in more-competitive areas. However, patients
from less competitive areas also experienced higher mortality and
cardiac complication rates. Thus the welfare implications of competition
in the 1980s were ambiguous: competition increased expenditures, and
led to better outcomes.
- After 1991, competition was unambiguously
welfare-improving. Treatment of AMI in the least competitive areas
was significantly more costly
than in areas with very high levels of competition, while adverse
health outcomes were reduced in competitive areas.
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