Monopoly, monopsony, and market definition: an antitrust perspective on market concentration among health insurers.

James Robinson uses the Herfindahl-Hirschman Index (HHI) to compute the concentration of commercial health insurance markets in most of the states during the past four years. The HHI is the analytical foundation for the federal antitrust merger guidelines, so we consider his findings from an antitrust perspective. Market concentration provides an important benchmark for antitrust analysis, but it does not, standing alone, indicate the presence of problematic (anticompetitive) behavior or a problem that antitrust law can solve. Even if it did, there are major problems in treating individual states as discrete insurance markets. Unless the market is correctly defined, any analysis of market concentration is thoroughly unreliable.

Improving performance in public hospitals: a role for comparative costs?

In order to encourage performance improvements, the English government has set targets for acute hospitals to reduce their unit costs. Targets are based on analysis of costs across all acute hospitals. This policy has parallels with that of 'yardstick competition', advocated as a means to encourage efficiency in industries that lack competitive pressures. However, the prospect of cost improvements may not be realised in England. Firstly, there are insufficient incentives to respond appropriately to the provision of comparative cost information. Secondly, there is more than one index purporting to measure relative hospital costs. As comparison of unit costs is highly dependent on the measurement technique adopted, caution should be exercised when setting performance targets.

Measuring competition in health care markets.

OBJECTIVE: Measuring competition is increasingly important for analysis of health care markets and policies. Measurement of competition in health care is made complex by the breadth of potential issues under study, by the lack of necessary data, and by rapid changes in health care financing and delivery. This study reviews key issues in the measurement of competition and is designed to familiarize researchers and policymakers interested in competition measurement, but not steeped in its practice, with key concepts, data sources, and ways of adapting measures to fit ongoing changes in health care markets. PRINCIPAL FINDINGS: Attention to several key issues will strengthen measurement. Important components of successful measurement are: careful identification of the products and market areas for study; selection of Herfindahl-Hirschman or other indices to fit the issues being considered; consideration of econometric problems, like endogeneity, with common measures; and attention to the ways that current marketplace changes, like growth in managed care, affect the performance of classic measures. Data needed for constructing measures are also frequently scarce, insufficient, or both. Measurement could be improved with access to better data.

Reconsideration of discharge data to measure competition in the hospital industry.

Economists have long used state-collected discharge data to construct Hirschman-Herfindahl (HH) indices measuring hospital competition. Since data are collected to determine the facility providing the service rather than ownership, the difference between the number of reporting facilities and the number of competitors has grown over time due to mergers and networking activities. Consequently, the validity of the discharge HH methodology, as currently employed, is in doubt. Comparing the annual census of New York state acute-care hospitals by the State and the American Hospital Association (AHA), we find that it is increasingly important to account for changes in ownership when constructing such indices.

Incentives and the management of physician behavior in health service organizations.

The performance of a health services organization is affected by the cumulative behavior of physicians out of proportion to their numbers or the economic value of their services. Managers are challenged to optimize physician behavior and to change it in concert with the evolving expectations of health service customers. Incentives are the tools available for this effort. This article discusses the interrelation of physician behavior, physician needs, and the major classes of incentives: economic, noneconomic, and rules. While most organizations recognize and use financial incentives, few utilize noneconomic incentives systematically. Given the financial restrictions of advanced markets, managers should understand the role of rules and the value of noneconomic issues to physicians when developing incentive programs.

Untangling healthcare competition.

Traditional approaches to competition may be inappropriate for healthcare providers. Neoclassical economics makes the implicit assumption that a single actor embodies consumption, compensation, and benefit from a transaction. In healthcare, this assumption does not hold. Instead, such actions are accomplished by three separate actors--consumers (physicians), customers (third-party payers), and clients (patients). A hospital simultaneously competes in three arenas. Hospitals compete for physicians along a technological dimension. Competition for third-party payers takes on a financial dimension. Hospitals compete for patients along a marketing dimension. Because of the complex marketplace interactions among hospital, patient, physician, and third-party payer, the role of price in controlling behavior is difficult to establish. The dynamics underlying the hospital selection decision--that is, the decision maker's expectations of services and the convenience of accessing services--must also be considered. Healthcare managers must understand the interrelationships involved in the three-pronged competitive perspective for several reasons. This perspective clarifies the multiple facets of competition a hospital faces. It also disentangles the actions previously fulfilled by the traditional single buyer. It illuminates the critical skills underlying the competition for each audience. Finally, it defines the primary criterion each audience uses in sorting among hospitals. Recognition of the multifaceted nature of competition among healthcare providers will help demystify market behavior and thereby improve internal organizational communication systems, managers' ability to focus on appropriate activities, and the hospital's ability to adapt to changing market conditions.

Corporate and philanthropic models of hospital governance: a taxonomic evaluation.

OBJECTIVE: We assess the theoretical integrity and practical utility of the corporate-philanthropic governance typology frequently invoked in debates about the appropriate form of governance for nonprofit hospitals operating in increasingly competitive health care environments. DATA SOURCES: Data were obtained from a 1985 national mailed survey of nonprofit hospitals conducted by the American Hospital Association (AHA) and the Hospital Research and Educational Trust (HRET). STUDY DESIGN: A sample 1,577 nonprofit community hospitals were selected for study. Representativeness was assessed by comparing the sample with the population of non-profit community hospitals on the dimensions of bed size, ownership type, urban-rural location, multihospital system membership, and census region. DATA COLLECTION: Measurement of governance types was based on hospital governance attributes conforming to those cited in the literature as distinguishing corporate from philanthropic models and classified into six central dimensions of governance: (1) size, (2) committee structure and activity, (3) board member selection, (4) board composition, (5) CEO power and influence, and (6) bylaws and activities. PRINCIPAL FINDINGS: Cluster analysis and ANCOVA indicated that hospital board forms adhered only partially to corporate and philanthropic governance models. Further, board forms varied systematically by specific organizational and environmental conditions. Boards exhibiting more corporate governance forms were more likely to be large, privately owned, urban, and operating in competitive markets than were hospitals showing more philanthropic governance forms. CONCLUSIONS: Findings suggest that the corporate-philanthropic governance distinction must be seen as an ideal rather than an actual depiction of hospital governance forms. Implications for health care governance are discussed.