Hospital Competition and Financial Performance: A Meta-Analytic Approach

Abstract

The relationship between competition and hospital financial performance has been investigated by many researchers for the last 20 years. Although considerable research has been devoted to understanding the relationship between competition and hospital financial performance, less attention has been paid to summarizing the mixed and sometimes conflicting findings of these studies and defining an overall effect of competition on hospital performance. This study is designed to evaluate the magnitude of the competition effect on hospital financial performance by using meta-analytic methods. As a measure of competition, we focused on the Herfindahl-Hirschman Index (HHI), the most frequently used measure of competition in the empirical literature. As financial performance indicators, we examined cost, profitability, and revenue ratios. In our final meta-analysis, we utilized 60 comparisons in 41 studies using random effect models. The results indicated overall effect size at positive 1% for profitability, at -1% for cost, and -3% for revenue, with only revenue being significant due to considerable heterogeneity across studies. The study findings suggest that hospitals located in less competitive markets (high HHI) experience higher profitability, lower cost, and lower revenue. Further advanced meta-analyses were also performed to understand underlying factors that led to high heterogeneity across studies.