Measuring competition in health care markets

Measuring competition is increasingly important for analysis of health care markets and policies. Measurement of competition in health care is made complex by the breadth of potential issues under study, by the lack of necessary data, and by rapid changes in health care financing and delivery. This study reviews key issues in the measurement of competition and is designed to familiarize researchers and policymakers interested in competition measurement, but not steeped in its practice, with key concepts, data sources, and ways of adapting measures to fit ongoing changes in health care markets.

Attention to several key issues will strengthen measurement. Important components of successful measurement are: careful identification of the products and market areas for study; selection of Herfindahl-Hirschman or other indices to fit the issues being considered; consideration of econometric problems, like endogeneity, with common measures; and attention to the ways that current marketplace changes, like growth in managed care, affect the performance of classic measures. Data needed for constructing measures are also frequently scarce, insufficient, or both. Measurement could be improved with access to better data.