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Measuring hospital competition.

S L White¹, T N Chirikos

¹Preferred Health Care, Ltd., Wilton, Connecticut 06897.

|March 1, 1988

Summary

This summary is machine-generated.

The Herfindahl market share index is often used to measure hospital competition. However, this study shows it

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Area of Science:

Health Economics
Healthcare Management
Econometrics

Background:

The Herfindahl Index is frequently used to assess market concentration in healthcare.
Previous studies often treat the Herfindahl Index as an exogenous variable in hospital performance models.

Purpose of the Study:

To evaluate the appropriateness of the Herfindahl Index as an exogenous competition variable in hospital sector research.
To investigate the endogeneity of the Herfindahl Index within hospital cost models.

Main Methods:

Analysis of cross-sectional Florida hospital data.
Econometric modeling to assess the influence of demand and supply factors on the Herfindahl Index.
Comparison of inferences from exogenous versus endogenous treatment of the Herfindahl Index.

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Main Results:

The Herfindahl Index is significantly influenced by common demand and supply factors in hospital markets.
Treating the Herfindahl Index as exogenous can lead to biased estimates of market competition's effect on hospital costs.

Conclusions:

The Herfindahl Index should not be treated as an exogenous variable in hospital cost analyses.
Endogenous treatment of the Herfindahl Index is crucial for accurate assessment of competition's impact on healthcare costs.