Hospital service duplication: Evidence on the medical arms race

Will the increase of medical equipment affect medical expenditure? Empirical evidence from a quasi-experiment in China

BACKGROUND

Many studies have shown that using new technologies and medical equipment contributes to increasing health expenditure. Relatively less empirical studies have measured the impact of medical equipment on rising medical costs in China. Against this backdrop, we aim to examine whether the large-scale medical equipment deployment explains the increase in health expenditure.

METHODS

Quasi-experimental research design with a difference-in-differences approach was adopted to explore whether an increase in the number of large-scale medical equipment impacts on outpatient and inpatient costs. Data were obtained from the 2011-2017 Health Financial Annals in Shaanxi province, China.

RESULTS

The increase in the number of large-scale medical equipment by 1 - regardless of the initial configuration - resulted in the increase of the average cost per outpatient visit and the average cost per inpatient visit by 10.6% (p < 0.05) and 8.0% (p < 0.05), respectively. Our complex difference in differences model illustrates that the increase in the number of large-scale medical equipment by 1 - regardless of the initial configuration-results in an increase in the average diagnostic cost per outpatient visit and the average diagnostic cost per inpatient visit by 27. 3% (p < 0.01) and 25. 5% (p < 0.01), respectively.

CONCLUSIONS

Our findings show that the medical expenditure differs significantly with the increase in the number of large-scale medical equipment. This study mainly revealed the relationship between the growth of the number of large-scale medical equipment and medical expenditure. Our novel perspective was used to measure the phenomenon of excessive use, and to explain the social phenomenon of inaccessible and expensive medical care in China.

Impacts of the medical arms race on medical expenses: a public hospital-based study in Shenzhen, China, during 2009-2013

BACKGROUND

Has the medical arms race (MAR) increased healthcare expenditures? Existing literature has yet to draw a consistent conclusion. Hence, this study aims to reexamine the relationship between the MAR and medical expenses by the data from public hospitals in Shenzhen, China, during the period of 2009 to 2013.

METHODS

This study's data were collected through panel datasets spanning 2009 to 2013 from the Shenzhen Statistical Yearbook, Shenzhen Health Statistical Yearbook, and annual reports from the Shenzhen Municipal Health Commission. The Herfindahl-Hirschman index and hierarchical linear modeling were combined for empirical analysis.

RESULTS

The MAR's impact on medical examination fees differed during the inpatient and outpatient stages. Further analysis verified that the MAR had the most significant impact on outpatient examination fees. Due to the characteristics of China's medical system, government regulations in the healthcare market may consequently accelerate the MAR among public hospitals. Strict government regulations on the medical system have also promoted increased medical examination costs to some extent. Once medical service prices are under strict administrative control, only drug and medical examination fees are the primary forms of extra income for hospitals. After the proportion of drug fees is further regulated, medical examinations will then become another staple method to generate extra revenue. These have distorted Chinese public hospitals' medical fees, which completely differ from those in other countries.

CONCLUSION

The government should confirm that they have allocated sufficient financial investments for public hospitals; otherwise, the competition among hospitals will transfer the burden to patients, and especially to those who can afford to pay for care. A core task for public hospitals involves providing safer, less expensive, and more reliable medical services.

Technology adoption and market allocation: The case of robotic surgery

The adoption of health care technology is central to improving productivity in this sector. To provide new evidence on how technology affects health care markets, we focus on one area where adoption has been particularly rapid: surgery for prostate cancer. Within just eight years, robotic surgery grew to become the dominant intensive prostate cancer treatment method. Using a difference-in-differences design, we show that adopting a robot drives prostate cancer patients to the hospital. To test whether this result reflects market expansion or business stealing, we also consider market-level effects of adoption and find effects that are significant but smaller, suggesting that adoption expands the market while also reallocating some patients across hospitals. Marginal patients are relatively young and healthy, inconsistent with the concern that adoption broadens the criteria for intervention to patients who would gain little from it. We conclude by discussing implications for the social value of technology diffusion in health care markets.

Tsunami of economic turmoil to hit the healthcare in 2021-2022: COVID-19 pandemic is just an earthquake

The COVID-19 pandemic caused the United States to hit record numbers of COVID-19 cases: peak unemployment of 14.7%, an increase in $4 trillion in national debt, and an estimated 3.4% GDP decline. The current socio-economic environment the pandemic created is just an earthquake that can create a tsunami that is bound to hit the healthcare system and can be felt around the globe. This tsunami is composed of a post-pandemic increase in healthcare facilities admission of indigent patients, decrease in medical reimbursement, and high operating costs to maintain healthcare workers, which can cause a synergistic effect that can lead to healthcare facilities experiencing significant negative total revenue. Time is of the essence, and it is imperative to make a collective effort from all healthcare professionals and legislatures to shift the nation's attention to the issue at hand that can threaten the closure of many healthcare facilities post-pandemic.

Does hospital competition lead to medical equipment expansion? Evidence on the medical arms race

With the implementation of a series of pro-competition policies in China, the hospital market competition has been intensified dramatically over the past decade. Based on previous literature, such competition is very much likely to bring about an upgoing trend in the promotion and expansion of medical facilities among hospitals as an essential strategy for attracting patients, which is known as Medical Arms Race (MAR). Comprehensive evaluations have been conducted by previous studies on the consequences of the MAR, which, however, merely provided inadequate empirical evidence on the relationship between hospital competition and MAR. Utilizing the variations in hospital competition across various regions and through different time periods in Sichuan Province as a prototype representative of the nationwide situation, a dynamic panel data model was established and adopted in this study for investigating whether intensified hospital competition had resulted in the expansion of medical facilities in China during the corresponding time period. The geopolitical boundaries and Herfindahl-Hirschman Index (HHI) were respectively employed to define the hospital market and measure the competition degree. We found that a 10% reduction in HHI is associated with an 8.79% increase in regional total costs of advanced medical equipment per capita, suggesting that hospital competition would lead to medical equipment expansion. Our results provide novel evidence on MAR which is particularly applicable for the healthcare system in China, providing suggestions for nationwide healthcare reform in order to mitigate potential negative outcomes induced by the implementation of pro-competition policies.

Strategic management in local hospital markets: service duplication or service differentiation

Background

The purpose of this study is to assess the influences of market structure on hospitals’ strategic decision to duplicate or differentiate services and to assess the relationship of duplication and differentiation to hospital performance. This study is different from previous research because it examines how a hospital decides which services to be duplicated or differentiated in a dyadic relationship embedded in a complex competitive network.

Methods

We use Linear Structural Equations (LISREL) to simultaneously estimate the relationships among market structure, duplicated and differentiated services, and performance. All non-federal, general acute hospitals in urban counties in the United States with more than one hospital are included in the sample (n = 1726). Forty-two high-tech services are selected for the study. Data are compiled from the American Hospital Association Annual Survey of Hospitals, Area Resource File, and CMS cost report files. State data from HealthLeaders-InterStudy for 2015 are also used.

Results

The findings provide support that hospitals duplicate and differentiate services relative to rivals in a local market. Size asymmetry between hospitals is related to both service duplication (negatively) and service differentiation (positively). With greater size asymmetry, a hospital utilizes its valuable resources for its own advantage to thwart competition from rivals by differentiating more high-tech services and reducing service duplication. Geographic distance is positively related to service duplication, with duplication increasing as distance between hospitals increases. Market competition is associated with lower service duplication. Both service differentiation and service duplication are associated with lower market share, higher costs, and lower profits.

Conclusions

The findings underscore the role of market structure as a check and balance on the provision of high-tech services. Hospital management should consider cutting back some services that are oversupplied and/or unprofitable and analyze the supply and demand in the market to avoid overdoing both service duplication and service differentiation.

Strategic Differentiation of High-Tech Services in Local Hospital Markets

This study assesses organizational and market factors related to high-tech service differentiation in local hospital markets. The sample includes 1704 nonfederal, general acute hospitals in urban counties in the United States. We relate organizational and market factors in 2011 to service differentiation in 2013, using ordinary least squares regression. Data are compiled from the American Hospital Association Annual Survey of Hospitals, Area Resource File, and Centers for Medicare and Medicaid Services. Results show that hospitals differentiate more services relative to market rivals if they are larger than the rival and if the hospitals are further apart geographically. Hospitals differentiate more services if they are large, teaching, and nonprofit or public and if they face more market competition. Hospitals differentiate fewer services from rivals if they belong to multihospital systems. The findings underscore the pressures that urban hospitals face to offer high-tech services despite the potential of high-tech services to drive hospital costs upward.

Identifying competitive strategies to improve the performance of hospitals in a competitive environment

Background

This study is based on competitive dynamics theory, and discusses competitive actions (including their implementation requirements, strategic orientation, and action complexity) that influence hospitals’ performance, while also meeting the requirements of Taiwan’s “global budget” insurance payment policy.

Methods

In order to investigate the possible actions of hospitals, the study was conducted in two stages. The first stage investigated the actions of hospitals from March 1 to May 31, 2009. Semi-structured questionnaires were used, which included in-depth interviews with senior supervisors of 10 medium- and large-scale hospitals in central Taiwan. This stage collected data related to the types of actions adopted by the hospitals in previous years. The second stage was based on the data collected from the first stage and on developed questionnaires, which were distributed from June 29 to November 1, 2009. The questionnaires were given to 20 superintendents, deputy superintendents, and supervisors responsible for the management of a hospital, and focused on medical centers and regional hospitals in central Taiwan in order to determine the types and number of competitive actions.

Results

First, the strategic orientation of an action has a significantly positive influence on subjective performance. Second, action complexity has a significantly positive influence on the subjective and the objective performance of a hospital. Third, the implementation requirements of actions do not have a significantly positive impact on the subjective or the objective performance of a hospital.

Conclusion

Managers facing a competitive healthcare environment should adopt competitive strategies to improve the performance of the hospital.

Can Hospital Competition Really Affect Hospital Behavior or Not? An Empirical Study of Different Competition Measures Comparison in Taiwan

Different approaches to measure the hospital competition index might lead to inconsistent results of the effects of hospital competition on innovation adoption. The purpose of this study is to adopt a different approach to define market area and measure the level of competition to examine whether hospital competition has a positive effect on hospital behavior, taking quality indicator projects participation as an example. A total of 238 hospitals located in Taipei, Taichung, and Kaohsiung were recruited in this study. Competition index was used as the independent variable, and participation lists of Taiwan Clinical Performance Indicator and Taiwan Healthcare Indicator Series in 2012 were used as dependent variables. All data used in this study were retrieved from the 2012 national hospital profiles and the participation list of the 2 quality indicator projects in 2012; these profiles are issued by the Taiwan Ministry of Health and Welfare annually. Geopolitical boundaries and 4 kinds of fixed radiuses were used to define market area. Herfindahl-Hirschman Index and hospital density were used to measure the level of competition. A total of 12 competition indices were produced in this study by employing the geographic information system, while max-rescaled R² was used to evaluate and compare the models on goodness of fit. The results show that the effects of hospital competition on quality indicator projects participation were varied, which mean different indicators for market competition might reveal different conclusions. Furthermore, this study also found the Herfindahl-Hirschman Index at 5-km radius was the optimum competition index.

Capital Investment by Independent and System-Affiliated Hospitals

Capital expenditures are a critical part of hospitals’ efforts to maintain quality of patient care and financial stability. Over the past 20 years, finding capital to fund these expenditures has become increasingly challenging for hospitals, particularly independent hospitals. Independent hospitals struggling to find ways to fund necessary capital investment are often advised that their best strategy is to join a multi-hospital system. There is scant empirical evidence to support the idea that system membership improves independent hospitals’ ability to make capital expenditures. Using data from the American Hospital Association and Medicare Cost Reports, we use difference-in-difference methods to examine changes in capital expenditures for independent hospitals that joined multi-hospital systems between 1997 and 2008. We find that in the first 5 years after acquisition, capital expenditures increase by an average of almost $16 000 per bed annually, as compared with non-acquired hospitals. In later years, the difference in capital expenditure is smaller and not statistically significant. Our results do not suggest that increases in capital expenditures vary by asset age or the size of the acquiring system.

Service duplication within urban hospital clusters

BACKGROUND

Approximately 80% of multihospital system member hospitals in U.S. urban areas are clustered with other same-system member hospitals located in the same market area. A key argument for clustering is the potential for reducing service duplication across cluster members.

PURPOSE

The aim of this study is to examine the effects of characteristics of hospital clusters on service duplication within 339 hospital clusters in U.S. metropolitan statistical areas and adjacent counties in 2002.

METHODOLOGY/APPROACH

Ordinary least squares regression is used to estimate the relationship between cluster characteristics in 1998 and duplicated services per cluster member in 2002.

FINDINGS

Duplication is higher in hospitals clusters with higher case mix index and higher bed size range. Duplication is lower in hospital clusters with more members, for-profit ownership, and more geographic dispersion.

PRACTICE IMPLICATIONS

Increases in the size of hospital clusters allow more opportunities for service rationalization. For-profit clusters may be innovators in rationalization activity, and they should be studied in this regard. Clusters with a higher case mix, lower geographic dispersion, and hub-and-spoke design (with high bed-size range) may find service reallocation less feasible.

Is the implementation of quality improvement methods in hospitals subject to the neighbourhood effect?

OBJECTIVE

Quality improvement (QI) methods have been fashionable in hospitals for decades. Previous studies have discussed the relationships between the implementation of QI methods and various external and internal factors, but there has been no examination to date of whether the neighbourhood effect influences such implementation. The aim of this study was to use a multilevel model to investigate whether and how the neighbourhood effect influences the implementation of QI methods in the hospital setting in Taiwan.

DESIGN

This is a retrospective questionnaire-based survey.

SETTING

All medical centres, regional hospitals and district teaching hospitals in Taiwan.

PARTICIPANTS

Directors or persons in charge of implementing QI methods in hospitals.

INTERVENTIONS

None.

MAIN OUTCOME MEASURES

The breadth and depth of QI method implementation.

RESULTS

Seventy-two of the 139 hospitals contacted returned the questionnaire, yielding a 52% response rate. The breadth and depth of QI method implementation increased over the 10-year study period, particularly between 2004 and 2006. The breadth and depth of the QI methods implemented in the participating hospitals were significantly associated with the average breadth and depth of those implemented by their competitors in the same medical area during the previous period. In addition, time was positively associated with the breadth and depth of QI method implementation.

CONCLUSIONS

In summary, the findings of this study show that hospitals' QI implementation status is influenced by that of their neighbours. Hence, the neighbourhood effect is an important factor in understanding hospital behaviour.

The impact of medical tourism on Thai private hospital management: informing hospital policy

BACKGROUND

The purpose of this paper is to help consolidate and understand management perceptions and experiences of a targeted group (n=7) of Vice-Presidents of international Private Thai hospitals in Bangkok regarding medical tourism impacts.

METHODS

The method adopted uses a small-scale qualitative inquiry. Examines the on-going development and service management factors which contribute to the establishment and strengthening of relationships between international patients and hospital medical services provision. Develops a qualitative model that attempts to conceptualize the findings from a diverse range of management views into a framework of main (8) - Hospital Management; Hospital Processes; Hospital Technology; Quality Related; Communications; Personnel; Financial; and Patients; and consequent sub-themes (22).

RESULTS

Outcomes from small-scale qualitative inquiries cannot by design be taken outside of its topical arena. This inevitably indicates that more research of this kind needs to be carried out to understand this field more effectively. The evidence suggests that Private Thai hospital management have established views about what constitutes the impact of medical tourism on hospital policies and practices when hospital staff interact with international patients.

CONCLUSIONS

As the private health service sector in Thailand continues to grow, future research is needed to help hospitals provide appropriate service patterns and appropriate medical products/services that meet international patient needs and aspirations. Highlights the increasing importance of the international consumer in Thailand's health industry. This study provides insights of private health service providers in Bangkok by helping to understand more effectively health service quality environments, subsequent service provision, and the integrated development and impacts of new medical technology.