Market power and hospital pricing: Are nonprofits different?

Health Affairs

Volumn 18, Issue 3, 1999, Pages 167-173

  Melnick, Glenn ^a   Keeler, Emmett ^b   Zwanziger, Jack ^c  

^a UNIVERSITY OF SOUTHERN CALIFORNIA   (United States)

^b RAND   (United States)

^c UNIVERSITY OF ROCHESTER   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; ECONOMIC ASPECT; ECONOMICS; HEALTH CARE COST; HEALTH CARE FACILITY; HEALTH CARE POLICY; HOSPITAL CHARGE; HUMAN; NON PROFIT HOSPITAL; ORGANIZATION AND MANAGEMENT; PUBLIC HOSPITAL; REGRESSION ANALYSIS; STATISTICAL MODEL; STATISTICS; UNITED STATES;

ECONOMIC COMPETITION; HEALTH CARE SECTOR; HEALTH FACILITY MERGER; HEALTH POLICY; HOSPITAL CHARGES; HOSPITALS, PUBLIC; HOSPITALS, VOLUNTARY; HUMANS; MODELS, ECONOMETRIC; OWNERSHIP; REGRESSION ANALYSIS; UNITED STATES;

EID: 0008561436     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.18.3.167     Document Type: Article

References (28)

1. Health Care M&A Monthly (New Canaan, Conn.: Irving Levin and Associates, February 1998).
2. Ibid.
3. FTC v Butterworth Health Corp and Blodgett Memorial Medical Center, No. 1:96-cv-49 (W.D. MI, 26 September 1996). Other court cases also have considered the argument that nonprofit hospitals should be exempted from antitrust prosecution because they are not likely to raise their prices following a merger. In U.S. v Carilion Health System, 707 F. Supp. 840 (W.D. Vir., 1989), the court accepted this argument, while in U.S. v Rockford Memorial Corporation, 717 F Supp. 1251 (N.D. Ill., 1989), aff'd. 898F 2d 1278 (7th Cir. 1990), the court rejected it.
4. W.J. Lynk, "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics 38, no. 2 (1995): 437-461.
5. M.C. Jaklevic, "Ownership and Pricing - Economists Knock Key Study in Grand Rapids Case," Modern Healthcare, 6 October 1997, 2-16; J.P. McConnell, "Article Unfair to Medic's Co-Founder," and S. Peltzman, "Journal Story Gave Incomplete Account," Modem Healthcare, 20 October 1997, 28; and D. Carlton, "Professor: Article Was Misleading," Modem Healthcare, 1 December 1997, 52.
6. M.C. Jaklevic, "Ownership and Pricing - Economists Knock Key Study in Grand Rapids Case," Modern Healthcare, 6 October 1997, 2-16; J.P. McConnell, "Article Unfair to Medic's Co-Founder," and S. Peltzman, "Journal Story Gave Incomplete Account," Modem Healthcare, 20 October 1997, 28; and D. Carlton, "Professor: Article Was Misleading," Modem Healthcare, 1 December 1997, 52.
7. M.C. Jaklevic, "Ownership and Pricing - Economists Knock Key Study in Grand Rapids Case," Modern Healthcare, 6 October 1997, 2-16; J.P. McConnell, "Article Unfair to Medic's Co-Founder," and S. Peltzman, "Journal Story Gave Incomplete Account," Modem Healthcare, 20 October 1997, 28; and D. Carlton, "Professor: Article Was Misleading," Modem Healthcare, 1 December 1997, 52.
8. M.C. Jaklevic, "Ownership and Pricing - Economists Knock Key Study in Grand Rapids Case," Modern Healthcare, 6 October 1997, 2-16; J.P. McConnell, "Article Unfair to Medic's Co-Founder," and S. Peltzman, "Journal Story Gave Incomplete Account," Modem Healthcare, 20 October 1997, 28; and D. Carlton, "Professor: Article Was Misleading," Modem Healthcare, 1 December 1997, 52.
9. E.B. Keeler, G. Melnick, and J. Zwanziger, "The Changing Effects of Competition on Non-Profit and For-Profit Hospital Pricing Behavior," Journal of Health Economics 18, no. 1 (1999): 69-86; D. Dranove and R. Ludwick, "Competition and Pricing by Nonprofit Hospitals: A Reassessment of Lynk's Analysis," Journal of Health Economics 18, no. 1 (1999): 87-98; and W.J. Lynk and L.R. Neumann, "Price and Profit," Journal of Health Economics 18, no. 1 (1999): 99-116.
10. E.B. Keeler, G. Melnick, and J. Zwanziger, "The Changing Effects of Competition on Non-Profit and For-Profit Hospital Pricing Behavior," Journal of Health Economics 18, no. 1 (1999): 69-86; D. Dranove and R. Ludwick, "Competition and Pricing by Nonprofit Hospitals: A Reassessment of Lynk's Analysis," Journal of Health Economics 18, no. 1 (1999): 87-98; and W.J. Lynk and L.R. Neumann, "Price and Profit," Journal of Health Economics 18, no. 1 (1999): 99-116.
11. E.B. Keeler, G. Melnick, and J. Zwanziger, "The Changing Effects of Competition on Non-Profit and For-Profit Hospital Pricing Behavior," Journal of Health Economics 18, no. 1 (1999): 69-86; D. Dranove and R. Ludwick, "Competition and Pricing by Nonprofit Hospitals: A Reassessment of Lynk's Analysis," Journal of Health Economics 18, no. 1 (1999): 87-98; and W.J. Lynk and L.R. Neumann, "Price and Profit," Journal of Health Economics 18, no. 1 (1999): 99-116.
12. J. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review 60, no. 1 (1970): 64-73; P.M. Danzon, "Hospital 'Profits': The Effect of Reimbursement Policies," Journal of Health Economics (May 1982): 29-52; M.V. Pauly, "Nonprofit Firms in Medical Markets," American Economic Review (May 1987): 257-262; M.A. Morrisey, G. J. Wedig, and M. Hassan, "Do Non-profit Hospitals Pay Their Way?" Health Affairs (Winter 1996): 132-144; and F. Sloan, "Not-for-Profit Ownership and Hospital Behavior," in Handbook of Health Economics, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier/North-Holland, 1999).
13. J. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review 60, no. 1 (1970): 64-73; P.M. Danzon, "Hospital 'Profits': The Effect of Reimbursement Policies," Journal of Health Economics (May 1982): 29-52; M.V. Pauly, "Nonprofit Firms in Medical Markets," American Economic Review (May 1987): 257-262; M.A. Morrisey, G. J. Wedig, and M. Hassan, "Do Non-profit Hospitals Pay Their Way?" Health Affairs (Winter 1996): 132-144; and F. Sloan, "Not-for-Profit Ownership and Hospital Behavior," in Handbook of Health Economics, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier/North-Holland, 1999).
14. J. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review 60, no. 1 (1970): 64-73; P.M. Danzon, "Hospital 'Profits': The Effect of Reimbursement Policies," Journal of Health Economics (May 1982): 29-52; M.V. Pauly, "Nonprofit Firms in Medical Markets," American Economic Review (May 1987): 257-262; M.A. Morrisey, G. J. Wedig, and M. Hassan, "Do Non-profit Hospitals Pay Their Way?" Health Affairs (Winter 1996): 132-144; and F. Sloan, "Not-for-Profit Ownership and Hospital Behavior," in Handbook of Health Economics, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier/North-Holland, 1999).
15. J. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review 60, no. 1 (1970): 64-73; P.M. Danzon, "Hospital 'Profits': The Effect of Reimbursement Policies," Journal of Health Economics (May 1982): 29-52; M.V. Pauly, "Nonprofit Firms in Medical Markets," American Economic Review (May 1987): 257-262; M.A. Morrisey, G. J. Wedig, and M. Hassan, "Do Non-profit Hospitals Pay Their Way?" Health Affairs (Winter 1996): 132-144; and F. Sloan, "Not-for-Profit Ownership and Hospital Behavior," in Handbook of Health Economics, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier/North-Holland, 1999).
16. J. Newhouse, "Toward a Theory of Nonprofit Institutions: An Economic Model of a Hospital," American Economic Review 60, no. 1 (1970): 64-73; P.M. Danzon, "Hospital 'Profits': The Effect of Reimbursement Policies," Journal of Health Economics (May 1982): 29-52; M.V. Pauly, "Nonprofit Firms in Medical Markets," American Economic Review (May 1987): 257-262; M.A. Morrisey, G. J. Wedig, and M. Hassan, "Do Non-profit Hospitals Pay Their Way?" Health Affairs (Winter 1996): 132-144; and F. Sloan, "Not-for-Profit Ownership and Hospital Behavior," in Handbook of Health Economics, ed. A.J. Culyer and J.P. Newhouse (Amsterdam: Elsevier/North-Holland, 1999).
17. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
18. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
19. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
20. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
21. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
22. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
23. G.A. Melnick et al., "The Effect of Market Structure and Bargaining Position on Hospital Prices," Journal of Health Economics 11, no. 3 (1992): 217-233; Lynk, "Nonprofit Hospital Mergers;" R. Connor et al., "Which Types of Hospital Mergers Save Consumers Money?" Health Affairs (November/December 1997): 62-74; H.E. Frech III and J.M. Woolley, "Consumer Information, Price, and Nonprice Competition among Hospitals," in Health Economics Worldwide: Conference Volume of the Second World Congress on Health Economics, ed. Peter Zweifel and H.E. Frech III (Boston: Kluwer Academic Publishers, 1992), 217-244; and M. Noether, "Competition among Hospitals," Journal of Health Economics (November 1988): 256-279. Robert Leibenluft, assistant director for health care of the Federal Trade Commission's Bureau of Competition, underscored the critical need for additional empirical evidence on non-profit pricing behavior in a 1998 Health Affairs interview, in which he stated that "more research would be helpful concerning how nonprofits compete and what happens when hospital markets become more concentrated." J.K. Iglehart, "The Federal Trade Commission in Action: The FTC's Robert F. Leibenluft," Health Affairs (September/October 1998): 65-74.
24. J. Needleman, D. Chollet, and J. Lamphere, "Hospital Conversion Trends," Health Affairs (March/April 1997): 187-191.
25. For discussion of comparison to Lynk and detailed description of data, methods, and econometric findings, see Keeler et al., "The Changing Effects of Competition on Non-Profit and For-Profit Hospital Pricing Behavior."
26. J. Zwanziger, G.A. Melnick, and J.M. Mann, "Measures of Hospital Market Structure: A Review of the Alternatives and a Proposed Approach," Socio-Econonic Planning Sciences 24, no. 2 (1990): 81-95.
27. Lynk, "Nonprofit Hospital Mergers and the Exercise of Market Power."
28. Studies have shown that the smallest hospitals have lower quality, on average. See E.B. Keeler et al., "Hospital Characteristics and Quality of Care," Journal of the American Medical Association 268, no. 13 (1992): 1709-1714.