Post details: An Empirical Study on Hospital Competition

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An Empirical Study on Hospital Competition

January 10th, 2008

by Tony Chen

Go over to Kellogg Insight to read a research article on whether hospitals "act strategically" in a competitive market. This particular economics professor focused on EP procedures. It's very rare that I see business strategy empirical studies on hospitals. So if you enjoy economics and/or strategy, definitely read it. The conclusion (written like a true economist):

“Recognizing that hospitals, insurance companies, and doctors are economic agents reacting to the economic conditions they face would go a long way to understanding healthcare,” Dafny concludes. “This paper contributes to the mounting evidence that the Hippocratic oath does not suffice to protect patients from undergoing unnecessary but profitable treatments.”

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Comments:

Comment from: Bob Edmondson [Visitor] · http://hospitalbusinessdevelopment.blogspot.com
This paper underscores the fundamental problem with the healthcare industry--the absence of a real market. In place of the effective interaction between consumers and suppliers, healthcare creates its own demand in response to a government payment program that lurches erratically, desparately trying to create balance between too much reimubursement and too little. This creates short-term bonanzas followed by dry spells.

It is clear that we need to either 1) transition to an open market responsive to economic forces or 2) go 100% government-sponsored. The indeterminate state we find ourselves in--and which, by the way is not addressed in most healthcare reform proposals--will never lead to an econmically viable model.

Until then, strategy will never be a function of competitive forces.
Permalink 01/10/08 @ 10:04

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