Findings suggest that more vigorous antitrust enforcement could lead to more efficient outcomes in hospital markets where competition is geographically feasible. (Photo: Shutterstock)
In many areas, care at higher-priced hospitals does not result in lower mortality rates, a new study from the National Bureau of Economic Research (NBER).
The study follows recent findings that U.S. hospital systems are becoming increasingly consolidated through mergers and acquisitions. The NBER paper noted that hospital mergers can raise prices and that hospitals in highly concentrated markets tend to have higher prices. The NBER researchers were exploring whether those higher-cost hospitals are delivering higher-quality care.
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The researchers looked at emergency care at hospitals and whether receiving care from a higher-priced hospital results in a lower mortality rate. It further looked at whether there was a price/quality relationship in concentrated (less competitive) and unconcentrated markets.
Different markets, different results
The study found that there was a difference in mortality depending on the type of market. For highly concentrated markets—markets that had one or more dominant health systems—there was no measurable relationship between high cost and high quality in care.
For less-concentrated markets with more competition, there was a measurable increase in quality for higher-cost care. However, the authors caution that they are not concluding that raising prices will increase quality.
"Our results highlight that in unconcentrated markets, higher-priced hospitals have higher quality and that their higher prices are potentially cost-effective," the study said. "These findings dovetail with work by Chandra et al. (2016), who find that higher-quality US hospitals have higher market share and grow more quickly—signposts of a functioning market… Our findings also complement work … [that suggests] that hospitals in unconcentrated markets may be making strategic investments in quality…. It is vital to note that our results do not suggest that a policy of raising hospital prices would lead to lower mortality in concentrated or unconcentrated markets."
Different markets may need different regulation, study concludes
The report presents a complex dynamic, where different types of markets have different results. The study's authors said the findings suggest that more vigorous antitrust enforcement could lead to more efficient outcomes in hospital markets where competition is geographically feasible—where there are different systems competing in the same region.
In addition, the study found that competition can increase quality, depending on the market. "Our analysis suggests that in unconcentrated markets, allowing hospitals to compete and prices to be market-determined is not necessarily wasteful. This is consistent with predictions … that, in some markets, high hospital prices may reflect strategic investments by firms to increase quality and not patients' lack of outside options." The study said that regulators should use caution regulating hospital prices in less-concentrated markets.
However, the authors noted that 69% of hospitals in the U.S. are in concentrated markets. In many of these markets, competition is limited. "Our evidence highlights that in these concentrated markets, high prices likely reflect patients' lack of alternative options, not hospital quality," the study said. "In these markets, regulating prices has scope to limit the rents hospitals collect from their bargaining power and could be successful if regulated prices were set high enough that they did not adversely impact quality."
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