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Has price competition changed hospital revenues and expenses in New York?
Jack Zwanziger1, Cathleen Mooney
1Health Policy and Administration (MC 923), School of Public Health, University of Illinois at Chicago, 1603 W. Taylor St., Chicago, IL 60612-4394, USA. jzwanzig@uic.edu
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The New York State Health Care Reform Act (HCRA) of 1996 initially slowed hospital revenue and expense growth through price competition. However, increased hospital mergers later countered these effects, leading to higher revenues.
Area of Science:
- Health Economics
- Healthcare Policy
- Hospital Management
Background:
- The New York State Health Care Reform Act (HCRA) of 1996 aimed to foster price competition within the healthcare market.
- Anticipated outcomes included reduced hospital revenues and expenses due to increased market competition.
Purpose of the Study:
- To analyze the impact of HCRA on hospital expenses and revenues between 1994 and 1999.
- To assess the differential effects of HCRA in markets with varying competition levels.
- To examine the relationship between hospital consolidation and financial performance.
Main Methods:
- Comparative analysis of hospital financial data (revenues and expenses) before and after HCRA enactment.
- Assessment of market competition levels and their correlation with financial trends.
- Evaluation of the influence of hospital system formation and increased concentration.
Main Results:
- Hospitals in more competitive markets experienced slower growth in both revenues and expenses.
- Increased concentration through hospital system formation was associated with higher revenues.
- HCRA's price competition initially constrained hospital financial growth in the short term.
Conclusions:
- The HCRA demonstrated a short-term ability to moderate hospital revenue and expense growth via price competition.
- The trend of hospital mergers and increasing market concentration partially offset the intended effects of HCRA.
- Healthcare market dynamics, including competition and consolidation, significantly influence hospital financial performance.
Abstract:
This study analyzes the factors that influenced hospital expenses and revenues prior to and following the enactment of the New York State Health Care Reform Act of 1996 (HCRA)-the period from 1994-1999. HCRA was expected to encourage price competition which in turn was anticipated to lower hospital revenues and expenses. We measured the differential effects on hospital revenues and expenses in markets with varying degrees of competition. We also measured the relationship between hospital revenues and expenses and the increased concentration resulting from the formation of local hospital systems. We found that revenues and expenses both grew more slowly for hospitals located in more competitive markets; hospital systems that increased concentration tended to have higher revenues. In the short run at least, price competition induced by HCRA did constrain both hospital expense and revenue growth, although the increase in hospital mergers countered this trend.
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