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Regulating Hospital Prices Based on Market Concentration

In this article. “Regulating Hospital Prices Based On Market Concentration Is Likely To Leave High-Price Hospitals Unaffected” By Maximilian J. Pany, Michael E. Chernew, and Leemore S. Dafny, the authors analyze the relationship between market concentration (using alternative measures of the Herfindahl-Hirschman Index (HHI)) and hospital market power (using a wage-adjusted hospital price index).  Their somewhat surprising finding is that most high-priced hospitals are located in the least concentrated markets (i.e. HHI < 2500).

In your discussion, I want you to focus on the policy implications of these results.

  • Specifically, are the recent federal legislative proposals described in the article to regulate hospital prices justified by the authors’ findings?
  • The reasons for your answer may be based on features of the authors’ study (such as the data or definitions of the measures used) as well as on factors or issues excluded from their analysis.
  • The authors discuss some excluded issues and factors, as well as limitations of their analysis, but you need not limit yourself to what is contained in the article.
  • However, limit yourself to two or three key reasons why the results presented in this article do or do not justify recent proposals to regulate high-priced hospitals.

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