Regulation and Competition in Hospital Markets

Einleitung / Introduction

To address challenges of rising demands and increased competitive pressure, hospitals’ service innovativeness has become central to stay competitive. In the same time, main part of the competitive threats still originates from the local healthcare market, since patients are most often treated in close destination to their home address. Given the dominant role of regional health services, increased innovation activities in form of new implemented medical procedures may be perceived by neighboring hospitals as a threat to their market position and thus, represents a stimulant to promote own innovation activities. A growing number of health economics studies emphasized the non-price competition, the so-called “medical arms race” (MAR) but do not provide adequate empirical evidence about the underlying dynamics among neighboring hospitals in context of the innovation management. We test whether a hospital responds to an increase in service innovation activities from neighboring hospitals by increasing their own service innovativeness. Further, we argue that the reaction is moderated by hospitals’ structural characteristics (degree of specialization, ownership) and market characteristics (competition intensity) and, thus, reconcile conflicting evidence

Methode / Method

We applying a spatial econometric analysis based on an unbalanced panel data set, which combines two data sources and comprises annual observations from 2012 to 2019 for 1,324 German hospitals. As a first data source, we process structural hospital and medical department data (e.g., ownership, number of beds, disease and procedural case numbers) from publicly available hospital quality management reports. As a second data source, we integrate regional district-level data on the population and the district’s GDP from the GENESIS database. The service innovativeness of hospitals is measured by the share of patients which are treated by newly implemented medical procedures in a particular year. The competitors’ innovation activity is measured by the average of the service innovativeness of neighbor hospitals within a radius of 30km

Ergebnisse / Results

Our results show a positive spatial effect of neighbors’ innovation activity on focal hospitals’ service innovativeness, which is more pronounced under competing hospitals that focus on similar clinical cases. We found as well that hospitals react with higher service innovativeness when they are confronted with increased innovation activities of local rivals if they are (1) highly specialized, (2) privately-owned and (3) if they face more intense competition in their local market

Zusammenfassung / Conclusion

Our study highlights the importance of considering the spatial perspective on service innovation, which also contribute to a deeper understanding of the underlying dynamics of the MAR and innovation diffusion

AutorInnen

Thomas Huynh, Institute for Innovation Research, Kiel University

Christoph Strumann, Institute for Entrepreneurship and Business Development, Luebeck University

Carsten Schultz, Institute for Innovation Research, Kiel University

Nils Reimers, Government Affairs and Market Access, Stryker Trauma GmbH

Einleitung / Introduction

As a result of the measures taken by governments to limit and reduce the soaring health care expenditures, hospital markets in Germany have experienced a stream of consolidations. The 10th Gesetz gegen Wettbewerbsbeschränkungen amendment, which came into effect in January 2021 and exempts mergers funded from the Hospital Structure Fund until the end of 2027 from the Bundeskartellamt’s merger control at the request of the respective state is expected to trigger a new wave of hospital consolidation. The literature mainly focuses on the impact of hospital merger and acquisitions on costs and financial performance, while the impact of hospital merger and acquisitions on treatment availability of hospitals and patient case-mix is largely unknown.

Methode / Method

We examined the impact of hospital merger and acquisitions on hospitals’ treatment availability decisions and patient case-mix using structured hospital quality reports from 2010-2020 in Germany. We considered hospitals with more than 30 beds and have identified 292 changes in hospital ownership from 2011-2019. We defined treatment availability using ICD chapters since the case-mix of patients by medical department vary widely in Germany. Treatment availability of an ICD chapter is defined as having at least 10 admissions per year with a primary diagnosis from the ICD chapter . We employed a difference-in-differences framework, comparing changes in the treatment availability of acquired hospitals from pre-acquisition to post-acquisition with changes in the treatment availability of hospitals with no change in ownership. We included hospital and year fixed effects in our model. We have also examined the changes in the utilization of medical procedures and the urgency of admitted cases using an urgency index based on supervised machine learning.

Ergebnisse / Results

Hospital merger and acquisitions were associated with declines in hospitals’ treatment availability in 18 out of 21 ICD chapters, with statistically significant declines for 11 ICD chapters ranging from 2-4 percentage points and a statistically significant increase of 5 percentage points for congenital malformations, deformities and chromosomal abnormalities after merger and acquisitions. Considering the procedures, the share of nuclear medicine diagnostic procedures significantly increased while the share of cases with high urgency declined after the merger and acquisitions.

Zusammenfassung / Conclusion

Treatment availability as well as patient case-mix changes as a result of hospital merger and acquisitions in Germany. Given the decline in treatment availability associated with hospital merger and acquisitions, our findings suggest that access to health care might be adversely affected and call for a comprehensive examination of impacts of hospital merger and acquisitions.

AutorInnen

Esra Eren Bayindir, Universität Hamburg, Hamburg Center for Health Economics

Jonas Schreyögg, Universität Hamburg, Hamburg Center for Health Economics

Einleitung / Introduction

Over the past three decades, the ownership type structure in the German hospital market has changed substantially with a large increase in privately owned hospitals. Previous research hints at higher productivity of private hospitals also achieved by reductions in staffing after privatization. In this paper, we analyze this channel for recent privatizations of German hospitals. We contribute to the literature by shedding light particularly at the change in skill mix of nursing staff and workload after privatizations of formerly public hospitals.

Methode / Method

To provide evidence on the employment effects of privatizations, we conduct a retrospective acquisition analysis using hospital level data provided by the Federal Joint Committee (G-BA) covering the years 2008 - 2018. We use a difference-in-differences approach that is preceded by a propensity score matching procedure as well as a staggered event study comparing hospitals that underwent mergers or acquisitions to those that did not. We study the employment effects on physicians and nursing staff of different qualification levels, substitution effects as well as the workload per employee.

Ergebnisse / Results

For physicians, we find no evidence of employment effects post-privatization. The absolute number of high-skilled nurses decreases, while the nurse-case ratio indicating workload does not change significantly. The number of middle- and low-skilled nurses decreases to a larger extent than high-skilled nurses after privatization. Here, also the ratio of inpatient cases per nurse increases significantly indicating higher workload in the lower-skilled workforce. However, we do not find evidence that high-skilled nurses are substituted by cheaper, lower-skilled nurses. There is, if at all, rather evidence for the opposite.

Zusammenfassung / Conclusion

We find that a privatization of a hospital has employment effects especially for the middle- and low skilled nursing-workforce. At the same time, new private-for-profit hospital owners do not reduce the number of physicians. This shows, that the lower the labor cost, the larger the reduction of employees. The overall changes are however small in magnitude.

AutorInnen

Theresa Bolz

Simon Reif, ZEW Mannheim

Jan Köhler, ZEW Mannheim

Einleitung / Introduction

High reservation costs put birth clinics under financial strain in case-based reimbursement schemes in regions where the number of births is low. The challenge to run birth clinics financially sustainable under DRG reimbursement has accelerated the closure of birth clinics in Germany. Out of the 985 hospitals in this market in the year 2003, only 622 (63%) were still operating in the year 2020. In this paper, we analyze how this change in the market structure affected service provision and quality of care. From a theoretical perspective, hospitals can only compete through quality of care in a market with fixed prices. In this setup, a decrease in competition from clinic closures would result in a reduction in quality. However, previous research also points to the positive effects of more volume on outcome and resource pooling which might allow birth clinics to provide better services in low-competition structures.

Methode / Method

We use annual hospital level quality data provided by the Federal Joint Committee (G-BA). The data provides an extensive set of information on hospitals (ownership, staffing, birth procedures, additional services offered by the hospitals). Our outcome variables are quality and service provision measures (rate of caesarean sections, special care services offered). We measure changes in competition by hospital closures from 2006 to 2019. To correct our estimates for potential endogeneity of hospital closures, we use regional voting shares as instrumental variables.

Ergebnisse / Results

Our preliminary results show an increased number of births in hospitals where competition is reduced. Changes in competition also affect both, the average mode of delivery as well as the availability of additional birth services.

Zusammenfassung / Conclusion

We analyze how changes in competition between birth clinics affect the care provided in hospitals. Insights from our paper contribute to the health policy discussion on access to birth clinics as well as to the academic literature on the effects of competition on quality of care.

AutorInnen

Simon Reif, ZEW – Leibniz-Zentrum für Europäische Wirtschaftsforschung

Jonathan Ehret