The changing effects of competition on non-profit and for-profit hospital pricing behavior

Has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payers? This paper uses time-series cross-sectional methods on California hospital discharge data from 1986-1994 to show the association of hospital prices with measures of market concentration changed steadily over this period, with prices now higher in less competitive areas, even for non-profit hospitals. Regression results are used to simulate the price impact of hypothetical hospital mergers. (C) 1999 Elsevier Science B.V. All rights reserved.