Private hospitals and affiliation with chains are increasing. What does this mean for patients?

CHE RESEARCH BITES

By Johannes S. Kunz, Carol Propper, Kevin E. Staub, and Rainer Winkelmann

05 July, 2024

Hospital markets around the world are experiencing significant transformation, with increasing consolidation into hospital chains, often accompanied by increases in for-profit ownership. How do these changes affect the quality of healthcare?

Hospital markets around the world are experiencing significant transformation, with increasing consolidation into hospital chains, often accompanied by increases in for-profit ownership. The Australian private hospital market mirrors these global trends, with few companies dominating the sector. A recent proposal by the Victorian government even considers mergers of public hospitals as a potential strategy to alleviate budgetary pressures. How may such changes affect the quality of healthcare?

We turned to data on the quality of services in the U.S. hospital market to find an answer.

Currently, one in four American patients is treated in a for-profit hospital, and three-quarters of hospitals are parts of chains.

On average, for-profit hospitals provide a lower quality of care compared to non-profits, especially in less competitive markets. This lower quality of care is mostly driven by for-profit hospitals that are part of chains. The national market power of chains might protect these hospitals from local competition, allowing them to maintain lower quality standards.

However, being part of a chain does not necessarily imply lower quality. Non-profit chain hospitals generally maintain a high standard of care, suggesting that belonging to a chain is not in itself associated with a reduction in the quality of care.

These findings suggest that increased market concentration and chain membership among for-profit hospitals can negatively impact hospital quality. Policymakers must consider these factors when crafting regulations concerning mergers, acquisitions, and performance incentives to ensure improvements in hospital performance and patient outcomes.

Find the original academic paper here: Kunz, J. S., Propper, C., Staub, K. E., & Winkelmann, R. (2024). Assessing the quality of public services: For-profits, chains, and concentration in the hospital market. Health economics, 10.1002/hec.4861. Advance online publication. https://doi.org/10.1002/hec.4861

Find out more about the Economic modelling of health policies and technologies research theme.

CHE Research Bites are short, easy-to-understand summaries of our recent academic papers highlighting new evidence and insights on topical issues in the health and healthcare sectors.

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