Hospital Competition, Pricing, and Quality

AEI’s James Pethokoukis has a brief blog post on a brand new study looking at healthcare costs. He reports:

“We have this large body of evidence covering many, many years that consistently shows if you happen to live in an area with only one hospital you are going to pay a lot more,” [Carnegie Mellon economist Martin] Gaynor said.

That helps explain why a C-Section in one Oregon market costs more than $15,000 and can run for as little as $3,000 in St. Louis, where there’s lots of competition. For years, hospital executives have defended these prices saying it’s about quality, or that they see sicker patients, or lots of folks on Medicare. “That’s just not true,” said co-author Yale economist Zack Cooper.

I mention Pethokoukis’ blog specifically because it provides a number of informative links on the subject, including one from The New York Times appropriately titled “The Experts Were Wrong About the Best Places for Better and Cheaper Health Care.” This is what makes central planning so dangerous: experts are often wrong when it comes to making sweeping societal changes via laws and policies. When the market is allowed to work, as in the case of hospitals, prices drop and quality improves.[ref]For example, recent research suggests that competition between hospitals improves managerial quality and thus hospital performance (e.g. increase in survival rates of emergency heart attacks).[/ref]

Give it a read.


1 thought on “Hospital Competition, Pricing, and Quality”

  1. Hayek and Mises demonstrated decades ago that central-planners never have sufficient data necessary to maximize the efficacy of their planning choices or schemes. They further postulated that true pricing cannot exist in a socialist system, and that is why you see places like oil-rich Venezuela running out of electricity and toilet paper.

Comments are closed.