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Do competition and managed care improve quality?
1School of Policy and Management, Florida International University, North Miami, Florida 33181, USA. nsari@fiu.edu
Health Economics
|October 9, 2002
Summary
Increased managed care in US hospitals improves quality, contrary to common belief. However, higher market concentration and mergers negatively impact patient care quality, necessitating broader antitrust considerations.
Area of Science:
- Health Services Research
- Health Economics
- Hospital Management
Background:
- The US healthcare industry has seen significant growth in managed care, network formation, and hospital integration.
- Understanding the quality implications of these market dynamics is crucial for healthcare policy.
Purpose of the Study:
- To empirically investigate the impact of managed care penetration and hospital competition on healthcare quality.
- To analyze the relationship between market structure and in-hospital complication rates.
Main Methods:
- Utilized hospital panel data from up to 16 US states spanning 1992-1997.
- Employed random effects, fixed effects, and instrumental variable fixed effect models.
- In-hospital complications were used as primary quality measures.
Main Results:
- Higher managed care penetration was associated with increased quality, specifically reducing inappropriate utilization, wound infections, and iatrogenic complications.
- Increased hospital market share and concentration correlated with decreased quality of care.
- Hospital mergers demonstrated undesirable quality consequences.
Conclusions:
- Managed care growth can positively influence hospital quality, challenging simplistic negative assumptions.
- Hospital market concentration and mergers pose risks to patient care quality.
- Antitrust policies for hospital mergers should incorporate quality impacts alongside price and cost considerations.