Multi-Product Considerations in the Assessment of U.S. Healthcare Market Shares

Continued consolidations and expansion of services by healthcare organizations has gained increasing attention from both regulators and policy makers. To provide greater insight into the potential effects this has on organizational behavior and the quality of healthcare provided, this paper presents the first application of the Panzar-Rosse model to multi-product U.S. hospitals. By utilizing the Panzar-Rosse model, we examine the relationship between multi-production operations and competition in the U.S. healthcare sector by considering the effects of a multi-product structure on the patterns of competition. Through the application to a national panel dataset, we find that the analysis of industry competition for healthcare services is underestimated when multi-product information isn’t considered. Further, hospitals offering increased levels of non-traditional healthcare services (i.e. outpatient, remote, primary care) relative to traditional healthcare services (i.e. inpatient, emergency care) experience significantly higher market power than hospitals offering only traditional forms of care. Lastly, quality of care increases with greater economies of scope and, following, greater market shares. As such, regulators and policy-makers should ensure consideration of multi-product offerings of U.S. healthcare organizations when evaluating assessments for decision-making purposes.