Appropriate measures of hospital market areas

As public and private policymakers turn to market-oriented strategies to control hospital prices, it is necessary to understand the conceptual underpinnings of hospital market area measurement. This article provides a framework for evaluating which definitions of hospital market areas are suitable for various types of analyses. Hospital market areas can be defined from two perspectives: an individual hospital perspective and that of the overall market. From each perspective, empirical definitions can be based on geopolitical boundaries, distance between hospitals, and patient-origin data. In this article, market areas are compared based on various descriptions using data on California hospitals and patient discharge abstracts.