The Effects of Hospital Competition on Inpatient Quality of Care

Existing empirical studies have produced inconclusive, and sometimes contradictory, findings on the effects of hospital competition on inpatient quality of care. These inconsistencies may be due to the use of different methodologies, hospital competition measures, and hospital quality measures. This paper applies the Quality Indicator software from the Agency for Healthcare Research and Quality to the 1997 Healthcare Cost and Utilization Project State Inpatient Databases to create three versions (i.e., observed, risk-adjusted, and "smoothed") of 38 distinct measures of inpatient quality. The relationship between 12 different hospital competition measures and these quality measures are assessed, using ordinary least squares, two-step efficient generalized method of moments, and negative binomial regression techniques. We find that across estimation strategies, hospital competition has an impact on a number of hospital quality measures. However, the effect is not unidirectional: some indicators show improvements in hospital quality with greater levels of competition, some show decreases in hospital quality, and others are unaffected. We provide hypotheses based on emerging areas of research that could explain these findings, but inconsistencies remain.