The impact of asymmetric information and ownership on nursing home access.

A consistent pattern in the nursing home industry is that non-profit institutions serve a lower proportion of Medicaid patients than do for-profit facilities. This is contrary to the expectation that non-profit, altruistically motivated firms should serve a larger proportion of the less profitable Medicaid patients than proprietary firms. The literature confirms this pattern empirically, but provides no theoretical basis for it, which is the contribution of this paper. Specifically, we show theoretically that information disparities between providers and consumers regarding quality fosters an environment in which the percentage of uninformed consumers is a key factor in determining public-private patient mix.

Is healthy competition healthy? New evidence of the impact of hospital competition.

Competition among hospitals is commonly regarded as inefficient due to the medical arms race phenomenon, but most evidence for this hypothesis predates the Medicare prospective payment system and preferred provider legislation. Recent studies indicate hospital competition reduces costs and prices, but nearly all such research has focused on California. We add to the body of literature that analyzes the effects of competition in hospital markets. Using data from the state of Washington, we show that hospitals assume more risk in competitive markets by being more likely to accept prospective payment arrangements with insurers. If the arrangement is retrospective, the hospital is more likely to offer a discount as the number of competing hospitals increases. Both findings indicate that competitive forces operate the same in hospital markets as in most others: as the number of competitors increases, prices decrease and market power shifts from the suppliers to purchasers. The medical arms race hypothesis that favors more concentrated hospital markets no longer appears to be valid.

Hospital reorganization and restructuring achieved through merger.

This article examines hospital reorganization and restructuring activities following merger for two study periods: 1983-1988 and 1989-1996. In both periods, hospitals rated strengthening hospital financial position as the most important reason for merger. There were also similarities in reorganizing actions, especially reductions in service duplication, consolidation of departments and programs, reductions in medical and support FTEs, and reductions in administrative staffing. Hospital mergers during 1989-1996, however, focused increasingly on reducing nursing FTEs and less on converting acquired hospitals to new service lines.