The economic environment of short-term general hospitals has changed dramatically. Inpatient occupancy rates ranged between 72% and 79% from 1946 to 1983, but fell to 64% by 1986 and have remained at that lower level despite reductions in bed capacity. Patient revenue margins for hospitals have fallen from about 1.5% in 1984 to nearly zero since 1987. Reductions in impatient capacity and the number of competing hospitals could yield resource savings for two reasons: reduced costs of empty beds, and reduced non-price competition that adds costs, as suggested by accumulating research on hospital cost variation. While past research on hospital mergers and system acquisitions has not typically found net savings, incentives for cost savings in horizontal consolidation are now stronger. This project will analyze changes from 1983 to 1989 in the market concentration of hospital care for over 300 metropolitan areas, and test for effects on (a) the growth of total community expenses for impatient care, (b) hospital revenue margins, and (c) uncompensated care. Different effects are expected from closures, local mergers, system acquisitions, and new entrants. The regression models will control for changes in input prices, population demographics and ability to pay for services, competition from HMOs and other non-hospital ambulatory care settings, and state and local government expenses for the medically indigent. A second track of research will address utilization rates and employment changes at the institution level after local mergers and system acquisitions not involving merger since 1980. This research could contribute to the methodologies and policies of federal antitrust actions regarding hospitals. Recent court cases have not been able to draw upon a systematic study of impacts over time of concentration changes. In addition, the findings could contribute to policy debates on whether the current reductions of capital cost reimbursement are preferable to more selective policies to recognize variations in capacity utilization or award grants for deliberate consolidations. Finally, the databases to be constructed should be useful to a broad range of research on community-level impacts of health financing and regulatory policies.
