Competition in Hospital Services

Concerns about increasing healthcare expenditures are a major motivation for introducing competition in hospital services. While competition on quality can lead to better outcomes, competition on prices has uncertain results. An active governmental role is key in ensuring quality provision and containing costs. Enforcers can address the lack of competition while regulators need to carefully define the set of variables on which competition should operate. Meaningful competition in hospital services is underpinned by the following conditions: (i) the existence of options, (ii) patients interested in choice (iii) information allowing well-informed choices, and (iv) incentives for hospitals to attract patients. Enforcers are responsible for ensuring competitive market structures. Hospital market concentration should be avoided when prices are not administered, as hospitals may abuse market power to the detriment of end users. Vertical or horizontal integration needs to be carefully assessed, as this can lead to behaviour that restrains competition.