Reconsideration of discharge data to measure competition in the hospital industry

Economists have long used state-collected discharge data to construct Hirschman-Herfindahl (HH) indices measuring hospital competition. Since data are collected to determine the facility providing the service rather than ownership, the difference between the number of reporting facilities and the number of competitors has grown over time due to mergers and networking activities. Consequently, the validity of the discharge HH methodology, as currently employed, is in doubt. Comparing the annual census of New York state acute-care hospitals by the State and the American Hospital Association (AHA), we find that it is increasingly important to account for changes in ownership when constructing such indices.