Hospital competition in major U.S. metropolitan areas: An empirical evidence

The relationship between competition and quality in procedural cardiac care

BACKGROUND

Anesthesiologists are frequently involved in efforts to meet perioperative quality metrics. The degree to which hospitals compete on publicly reported quality measures, however, is unclear. We hypothesized that hospitals in more competitive environments would be more likely to compete on quality and thus perform better on such measures. To test our hypothesis, we studied the relationship between competition and quality in hospitals providing procedural cardiac care and participating in a national quality database.

METHODS

For hospitals performing heart valve surgery (HVS) and delivering acute myocardial infarction (AMI) care in the Hospital Compare database, we assessed the degree of intrahospital competition using both geographical radius and federally defined metropolitan statistical area (MSA) to determine the degree of intrahospital competition. For each hospital, we then correlated the degree of competition with quality measure performance, mortality, patient volume, and per-patient Medicare costs for both HVS and AMI.

RESULTS

Six hundred fifty-three hospitals met inclusion criteria for HVS and 1898 hospitals for AMI care. We found that for both definitions of competition, hospitals facing greater competition did not demonstrate better quality measure performance for either HVS or AMI. For both diagnoses, competition by number of hospitals correlated positively with cost: partial correlation coefficients = 0.40 (0.42 for MSA) (P < 0.001) for HVS and 0.52 (0.47 for MSA) (P < 0.001) for AMI.

CONCLUSIONS

An analysis of the Hospital Compare database found that competition among hospitals correlated overall with increased Medicare costs but did not predict better scores on publicly reported quality metrics. Our results suggest that hospitals do not compete meaningfully on publicly reported quality metrics or costs.

Information asymmetry and performance tilting in hospitals: a national empirical study

OBJECTIVE

To test the performance tilting hypothesis using information asymmetry (IA) within the community oriented activities of prospective payment system (PPS) hospitals.

DATA SOURCES

American Hospital Association (AHA) Annual Survey Database and Medicare Cost Report from the Centers for Medicare and Medicaid Services both in fiscal year 2000; Health maintenance organization (HMO) penetration from the Area Resource File.

STUDY DESIGN

A cross-sectional analysis was performed, using a national sample of 3162 PPS hospitals merged from the AHA data set and Medicare profit data. The individual hospital serves as the unit of empirical analysis. General linear model, multiple and logistic regressions are utilized to examine the association between IA and hospital performance indicators.

PRINCIPAL FINDINGS

A positive relationship between IA and Medicare profit margins was found. Higher IA was associated with decreased likelihood that the hospital would report having a long-term plan for the health of its host community, and with increased likelihood of performance tilting.

CONCLUSION

Information asymmetry offers hospitals an advantageous position in achieving profit maximization. The study also documented the presence of performance tilting by health-care management. Whether increased information demands from a society accustomed to significant disclosure will reduce this agency problem is not yet clear.