Single specialty hospitals (SSHs) that provide cardiac, orthopedic, and/or surgical care, are a relatively new and rapidly growing sub-industry among U.S. hospitals. These providers, the majority of which are owned by physicians who refer patients to them, have stirred considerable controversy over whether they support unfair competition or promote economic efficiency leading to a new competitive benchmark for costs and quality. Yet the scientific knowledge base supporting these convictions has not been established. This project aims to address this deficiency by analyzing how entry of SSHs into the marketplace affects competition among hospitals. It explores the responses of community hospital competitors in the face of the new competitive challenge. More specifically, it examines changes within competitor community hospitals following entry of SSHs into the marketplace that relate to key features of the competitive process: pricing, quality, uncompensated care, average costs, profit margins, and service mix. Methods comprise quantitative analysis of state and national level administrative data for three key states in which the SSH sub-industry is geographically concentrated and growing: TX, CA and AZ. The research plan entails identification of hospital markets that have experienced the entry of physician-owned SSHs in recent years in the three states. Market areas are Hospital Referral Regions as defined in the Dartmouth Atlas of Health Care. The analytic plan is to examine changes in the key features of competitor hospital behavior and performance before and after entry of the SSHs, and to compare them with changes over the same time period in hospitals located in markets where there are no physician-owned SSHs. This method, difference-in-differences, controls for trend effects because the comparison group is presumably subject to the same temporal influences as hospitals located in markets with SSH entry. The long-term objective is to assess the dynamic market consequences associated with entry of physician-owned SSHs into local markets. Knowledge of how SSHs affect overall hospital cost and quality in the markets where they operate will provide a foundation for future policy evaluation of the following question: Does the organization of hospital care around single specialties truly enhance the capability of the U.S. hospital sector in providing high-quality value-driven service? ? ? ? ?
