Hospital Competition and Financial Performance: A Meta-Analytic Approach

The relationship between competition and hospital financial performance has been investigated by many researchers for the last 20 years. Although considerable research has been devoted to understanding the relationship between competition and hospital financial performance, less attention has been paid to summarizing the mixed and sometimes conflicting findings of these studies and defining an overall effect of competition on hospital performance. This study is designed to evaluate the magnitude of competition effect on hospital financial performance by using meta-analytic methods. As a measure of competition, we focused on Herfindahl-Hirschman Index (HHI), the most frequently used measure of competition in the empirical literature. We also examined cost, profitability and revenue ratios to measure the financial performance. In our final meta-analysis, we utilized 60 comparisons in 41 studies in random effect models. The results indicated overall effect size at positive 1% for profitability, at -1% for cost, and -3% for revenue, with only revenue being significant due to large heterogeneity across studies. This suggests that hospitals located in less competitive markets (high HHI) experience higher profitability, lower cost, and lower revenue. Further moderator analyses were also performed to better understand underlying factors that led to high heterogeneity across studies.