Does hospital competition improve the quality of outpatient care? - empirical evidence from a quasi-experiment in a Chinese city

Background Although countries worldwide have launched a series of pro-competition reforms, the literature on the impacts of hospital competition has produced a complex and contradictory picture. This study examined whether hospital competition contributed to an increase in the quality of outpatient care. Methods The dataset comprises encounter data on 406,664 outpatients with influenza between 2015 and 2019 in China. Competition was measured using the Herfindahl-Hirschman index (HHI). Whether patients had 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department were the three quality outcomes assessed. Binary regression models with crossed random intercepts were constructed to estimate the impacts of the HHI on the quality of outpatient care. The intensity of nighttime lights was employed as an instrumental variable to address the endogenous relationship between the HHI and the quality of outpatient care. Results We demonstrated that an increase in the degree of hospital competition was associated with improved quality of outpatient care. For each 1% increase in the degree of hospital competition, an individual’s risk of having a 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department fell by 34.9%, 18.3%, and 20.8%, respectively. The impacts of hospital competition on improving the quality of outpatient care were more substantial among females, individuals who used the Urban and Rural Residents Basic Medical Insurance to pay for their medical costs, individuals who visited accredited hospitals, and adults aged 25 to 64 years when compared with their counterparts. Conclusion This study demonstrated that hospital competition contributed to better quality of outpatient care under a regime with a regulated ceiling price. Competition is suggested to be promoted in the outpatient care market where hospitals have control over quality and government sets a limit on the prices that hospitals may charge.