Overlapping markets and quality competition among community health centers

To examine the response of community health center (CHC) quality to quality levels at neighboring CHCs in the presence of non-price competition.

A quasi-experimental study of US community health centers. Outcome variables were indices that measured overall quality of CHC care. Using patient flow data, we constructed CHC-specific Hirschman-Herfindahl index (HHI) and competitors' composite quality measure. The plausibly exogenous change in characteristics of "competitors' competitors" was exploited to identify the relationship between competition and quality of care, using a generalized two-stage least square model with instrumental variables.

Using the Health Center Program Uniform Data System (2014-2018), linked with American Community Survey and Medical Expenditure Panel Survey, we analyzed 1098 unique federally funded CHCs in 50 states and District of Columbia which had at least one neighboring CHC and had non-missing data for 2015-2018 (4226 CHC-years).

Most of CHCs served populations in overlapping geographic markets, with median market concentration decreasing during the study period. A one-percent increase in competitors' quality was associated with a 0.71-percent increase in an index CHC's composite quality (p < 0.01), consisting of a 0.59-percent increase in chronic condition control rates (p < 0.01); a 0.68-percent increase in the screening and assessment rates (p < 0.01); and a 0.78-percent increase in medication management rates (p < 0.01). The association was stronger at CHCs serving a smaller proportion of uninsured patients. No significant quality reaction was observed at CHCs with a percentage of uninsured patients larger than the 75th percentile. We observed no significant associations between HHI and quality.

Increasing competition does not harm quality of care at CHCs. A CHC appears to improve its quality if its competitors improved quality. The beneficial quality effect was less pronounced in CHCs providing a significant proportion of care to uninsured patients, suggesting lack of incentives faced by these CHCs.