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Do hospitals respond to rivals' quality and efficiency? A spatial panel econometric analysis.
Francesco Longo1,2, Luigi Siciliani1,2, Hugh Gravelle2
1Department of Economic and Related Studies, University of York, York, UK.
Health Economics
|September 24, 2017
Summary
English hospitals do not alter their quality or efficiency based on rivals, except for overall mortality rates which increase with neighboring hospitals' mortality. This study examines hospital performance and competition.
Area of Science:
- Health Services Research
- Health Economics
- Spatial Econometrics
Background:
- Hospitals operate within competitive environments, influencing strategic decisions.
- Understanding inter-hospital dynamics is crucial for healthcare policy and resource allocation.
- Previous research has not definitively established how hospital quality and efficiency respond to neighboring institutions.
Purpose of the Study:
- To investigate if English National Health Service (NHS) hospitals adjust their quality or efficiency in response to changes in neighboring hospitals' performance.
- To develop and test a theoretical model predicting hospital responses to rivals' quality and efficiency.
- To empirically analyze the spatial relationships between hospital quality, efficiency, and competition.
Main Methods:
- Utilized data on eight quality measures (e.g., mortality, readmissions, patient outcomes, satisfaction) and six efficiency measures (e.g., occupancy, cancelled operations, costs) for public hospitals in England (2010/11-2013/14).
- Employed spatial cross-sectional and spatial fixed- and random-effects panel data models to analyze the data.
- Tested robustness through spatially correlated covariates/errors and instrumental variable approaches for rivals' quality and efficiency.
Main Results:
- Hospital quality and efficiency measures demonstrated unconditional spatial correlation.
- Spatial regression models indicated no significant response of a hospital's quality or efficiency to its rivals', except for overall mortality.
- Overall hospital mortality was positively associated with the mortality rates of neighboring hospitals.
Conclusions:
- Hospitals in the English NHS do not appear to strategically adjust their quality or efficiency based on competitors' performance.
- The exception is overall mortality, suggesting a potential 'contagion' or shared systemic issue affecting mortality rates in proximity.
- Findings suggest limited competitive responses in quality and efficiency, challenging assumptions of market-driven improvements in this healthcare context.
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