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Related Experiment Videos

Has competition lowered hospital prices?

Jack Zwanziger1, Cathleen Mooney

  • 1Health Policy and Administration, School of Public Health, University of Illinois at Chicago, 60612-4394, USA. jzwanzig@uic.edu

Inquiry : a Journal of Medical Care Organization, Provision and Financing
|July 15, 2005
PubMed
Summary

New York deregulated hospital prices in 1997, leading to lower payments in competitive markets. However, hospital mergers later increased prices, impacting the long-term success of deregulation.

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Area of Science:

  • Health Economics
  • Healthcare Policy
  • Market Competition

Background:

  • New York State deregulated hospital prices on January 1, 1997.
  • The policy aimed to leverage market competition for controlling hospital costs and enhancing efficiency.
  • This study examines the impact of this deregulation on hospital payment dynamics.

Purpose of the Study:

  • To analyze the relationship between hospital prices and market characteristics post-deregulation.
  • To assess the effectiveness of market competition in controlling hospital payments.
  • To investigate the influence of hospital mergers on price trends.

Main Methods:

  • Utilized data from annual reports of all New York-based health maintenance organizations (HMOs).
  • Included data on payments to and utilization of major hospitals within HMO networks.

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  • Employed statistical models to estimate price determinants based on hospital, plan, and market attributes.

    • Main Results:

    • Hospitals in more competitive markets experienced lower payments after 1997.
    • Hospital mergers led to price increases by reducing local market competitiveness.
    • Deregulation initially succeeded in reducing hospital payments through price competition.

    Conclusions:

    • Hospital deregulation in New York demonstrated short-term success in lowering payments via competition.
    • The long-term effectiveness of deregulation is uncertain due to ongoing structural changes like hospital mergers.
    • Future research should monitor the evolving hospital industry landscape and its impact on healthcare costs.