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Market Structure as a Determinant of Patient Care Quality

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  • Nathan E. Wilso

    (Federal Trade Commission)

Abstract

Understanding how market structure affects health outcomes is difficult because of the nonrandom nature of where patients receive care. I develop a control function approach that is robust not just to selection on unobservable differences in patients’ condition severity, but also to selection on unobservable variation in how patients respond to different treatments. I apply the approach to data from 2004 to 2008 for all hemodialysis patients in Atlanta, Georgia. The results indicate that a one-facility acquisition by the average provider in the average market would lead the average patient to spend 28 percent more days in the ICU/CCU. Estimates that do not control for the role of idiosyncratic matching would predict smaller, though still economically and statistically significant, effects on the affected patients. I interpret the results as indicating the importance of idiosyncratic matching in this market, which multifacility firms address by differentiating their operations.

Suggested Citation

  • Nathan E. Wilso, 2016. "Market Structure as a Determinant of Patient Care Quality," American Journal of Health Economics, University of Chicago Press, vol. 2(2), pages 241-271, Spring.
    • Handle: RePEc:ucp:amjhec:v:2:y:2016:i:2:p:241-271
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    File URL: https://www.journals.uchicago.edu/doi/pdf/10.1162/AJHE_a_00043
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    Cited by:

    1. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2016. "Market structure, patient choice and hospital quality for elective patients," Working Papers 139cherp, Centre for Health Economics, University of York.
    2. Nathan E. Wilson, 2021. "The Impact of Competition on Investment: Evidence From California Hospitals," Journal of Industrial Economics, Wiley Blackwell, vol. 69(1), pages 1-32, March.
    3. Saghafian, Soroush & Hopp, Wallace J., 2017. "Can Public Reporting Cure Healthcare? The Role of Quality Transparency in Improving Patient-Provider Alignment," Working Paper Series rwp17-044, Harvard University, John F. Kennedy School of Government.
    4. Soroush Saghafian & Wallace J. Hopp, 2020. "Can Public Reporting Cure Healthcare? The Role of Quality Transparency in Improving Patient–Provider Alignment," Operations Research, INFORMS, vol. 68(1), pages 71-92, January.
    5. Nathan E. Wilson, 2016. "For-profit status and industry evolution in health care markets: evidence from the dialysis industry," International Journal of Health Economics and Management, Springer, vol. 16(4), pages 297-319, December.
    6. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2021. "Hospital competition and quality for non‐emergency patients in the English NHS," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 382-414, June.
    7. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2018. "Effects of Market Structure and Patient Choice on Hospital Quality for Planned Patients," School of Economics Discussion Papers 1118, School of Economics, University of Surrey.

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    More about this item

    Keywords

    dialysis; competition; quality; control function; selection bias; random coefficients;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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