Defining Geographic Markets for Hospital Care

There is a substantial body of economic literature discussing various approaches to delimiting geographic markets.' These approaches, however, seldom have been applied to analyses of hospital markets. With the growth of multihospital systems2 and the increased interest of the Federal Trade Commission and the United States Department of Justice in examining competition in the health care sector,3 the definition of hospital markets has become increasingly important. Until recently, efforts to examine hospital competition and efforts to allow for competing firms in analyses of hospital behavior have used geopolitical boundaries to describe hospital markets.4 These market definitions are handy, but probably economically meaningless; nevertheless, they have come to serve as the basis for new hospital payment mechanisms and have been