Unbiased Analysis of Today's Healthcare Issues

Does Competition Improve Quality?

Written By: Jason Shafrin - Jun• 03•13

For the most part, the answer is “Yes” according to a recent study by Jung and Polsky.  The authors use a Herfindahl index to measure competition and examine how outcomes for home health patients vary based on the level of competition.  The (unadjusted) figures–based on data from OASIS— show that quality increases as competitions increases (moving from left to right on the x-axis).  The adjusted numbers tell a similar story.  However, for the most competitive markets, quality actually declines.  The authors explain this anomaly as follows:

Although small, this negative effect of competition on quality suggests that the ease of exit may restrict the ability of competition to improve quality in home health care markets; however, this possibility is limited to highly competitive markets where there may have been many easy entries and where exits are likely to be a viable option.

Nevertheless, the general trend is that more competition leads to higher quality, but this relationship is highly nonlinear.




An important caveat (that the authors do make) is that competition may occur over other dimensions of quality.  For instance, home health agencies may provide longer visits or more amenitites during their visits in markets that are more competitive.




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