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Is hospital competition wasteful?

D Dranove¹, M Shanley, C Simon

¹Northwestern University.

The Rand Journal of Economics

|February 2, 1993

Summary

Local hospital competition may not be a "medical arms race." Instead, the extent of the market, not competition, primarily determines specialized services, highlighting significant economies of scale.

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Area of Science:

Health economics
Healthcare management
Market analysis

Background:

The

Purpose of the Study:

To develop and test a model predicting the supply of specialized hospital services in local markets.
To evaluate the validity of the

Main Methods:

Developed a theoretical model for specialized service provision.
Analyzed data from California hospitals.

Main Results:

Found minimal support for the

Conclusions:

The extent of the market is a crucial factor in determining specialized service supply.
Overestimating competition's role arises from improperly defining market scope.