Glenn Melnick

Measures of hospital market structure: a review of the alternatives and a proposed approach

Efforts to evaluate the plethora of recent programs adopted by public and private payers to promote hospital price competition critically depend on the availability of measures of local market structure. To gauge the effects of these policies, researchers must be able to delineate hospital market areas and measure the intensity of competition within these markets. This article reviews alternative methods that have been used to define hospital market areas and measure market structure. We propose an empirical patient origin-based method for measuring hospital market structure. The results of sensitivity analyses using data on California hospitals demonstrate the robustness of our measures over a broad range of parameter values.

State health care expenditures under competition and regulation, 1980 through 1991.

OBJECTIVES This paper examines health expenditure growth under two alternative policy approaches: competition-based managed care and state government rate regulation. METHODS Data are presented on cumulative growth in real per capita health expenditures between 1980 and 1991 so as to compare California, a state with a pro-competitive policy, with the US average and with four states with established regulation programs. RESULTS Real per capita expenditures for hospital services in the United States grew 54% between 1980 and 1991, while in California the growth was half the national rate, or 27%. Real per capita expenditures for physician services and drug expenditures in the United States grew by 82% and 65%, respectively, while in California these expenditures increased only 58% and 41%, respectively. Californias growth rate was below that of all four regulatory states for all measures of health care cost inflation. CONCLUSIONS On the basis of these findings, a properly structured competitive approach could play a significant role in controlling health expenditures in the United States.