The association of hospital competition with inpatient costs of stroke: Evidence from China

The main purpose of this article is to analyze the association between hospital competition and stroke inpatient costs. Stroke is selected as the representative of a class of diseases characterized by asymmetric information and lack of autonomy of service choice. A total of 98,061 observations are selected from a medical record dataset in the Sichuan Province. The fixed radius approach of 15 miles and Herfindahl-Hirschman Index (HHI) are employed to define the hospital market and measure the competition intensity, respectively. The log-linear multivariate regression model is used to analyze the association between competition and stroke inpatient costs. The results show that every 10% increase in competition (0.1 unit decrease of HHI value) associated with an average 2.38% decrease in stroke inpatient total costs. We also explore the relationship between competition and sub-group costs of stroke inpatient, finding that hospitals facing more competition incur lower treatment, drug, and consumable costs. Further analysis shows that for-profit, private, and low-level hospitals are more sensitive when facing changes in market competition degree. Our study offers empirical evidence to support the introduction of pro-competition in China's new round of national health reform and provide implications for other countries facing similar health care challenges.