Competition in Outpatient Procedure Markets

More than half of all medical procedures performed in the United States occur in an outpatient setting, yet few studies have explored how competition among ambulatory surgery centers (ASCs) and hospitals affects prices for commercially insured outpatient services.

We examined the association between prices for commercially insured outpatient procedures and competition among ASCs and hospitals.

Using claims from the Health Care Cost Institute for 2008-2012, we constructed county-level price indices for outpatient procedures in hospital outpatient departments and ASCs. Using regression analysis, we estimated the association between prices and ASC availability, outpatient and inpatient hospital competition, hospital/physician integration, and several other hospital market characteristics. Our estimates were identified from changes within counties over time.

First, ASC availability was associated with decreases in overall outpatient procedure prices, mostly due to reductions in the prices paid to hospital outpatient departments. Second, competition among hospitals was also associated with decreases in outpatient procedure prices-and had an effect more than twice as large as the effect of ASC availability. Third, competition among ASCs was also associated with reductions in the prices paid to other ASCs.

Our results suggest that competition from ASCs benefits consumers through lower prices for outpatient procedures. Any conclusions about the broader welfare implications of the rise in ASCs, however, must balance the price reductions that we found with the volume increases found in previous work, particularly the volume increases at physician-owned ASCs.