Hospital competition under patient inertia: do switching costs stimulate quality provision?

Detalhes bibliográficos
Autor(a) principal: Sá, Luís Carlos Sousa
Data de Publicação: 2019
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: https://hdl.handle.net/1822/62589
Resumo: Recent empirical evidence establishes previous use as a strong predictor of patient choice of hospital and indicates that switching costs explain a significant share of inertia in the hospital industry. In a model of competition between two semi-altruistic and horizontally differentiated hospitals with inherited demand, I investigate the effect of lower switching costs on quality provision and show that it depends on the hospitals' production technology and degree of altruism. If cost substitutability (complementarity) between quality and output is sufficiently weak (strong) relative to altruism, lower switching costs reduce quality at the high-volume hospital, average quality, and patient welfare. While milder patient preferences increase the scope for an increase in quality at both hospitals, it can only occur if hospitals are semi-altruistic. Finally, I show that the distribution of patients between hospitals matters. Even if hospital-level quality and patient welfare increase, lower switching costs may lead to lower average quality.
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spelling Hospital competition under patient inertia: do switching costs stimulate quality provision?Hospital competitionQualitySwitching costsPatient choiceVolume-outcome effectsAltruismRecent empirical evidence establishes previous use as a strong predictor of patient choice of hospital and indicates that switching costs explain a significant share of inertia in the hospital industry. In a model of competition between two semi-altruistic and horizontally differentiated hospitals with inherited demand, I investigate the effect of lower switching costs on quality provision and show that it depends on the hospitals' production technology and degree of altruism. If cost substitutability (complementarity) between quality and output is sufficiently weak (strong) relative to altruism, lower switching costs reduce quality at the high-volume hospital, average quality, and patient welfare. While milder patient preferences increase the scope for an increase in quality at both hospitals, it can only occur if hospitals are semi-altruistic. Finally, I show that the distribution of patients between hospitals matters. Even if hospital-level quality and patient welfare increase, lower switching costs may lead to lower average quality.This paper is financed by National Funds of the FCT – Portuguese Foundation for Science and Technology within the project UID/ECO/03182/2019. I also thank FCT for the PhD Studentship SFRH/BD/129073/2017, financed by National Funds of the FCT and the European Social Fund (ESF).Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)Universidade do MinhoSá, Luís Carlos Sousa20192019-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/1822/62589enghttps://www.eeg.uminho.pt/pt/investigar/nipe/Paginas/publicacoes.aspxinfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-21T12:04:14Zoai:repositorium.sdum.uminho.pt:1822/62589Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:54:31.350876Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Hospital competition under patient inertia: do switching costs stimulate quality provision?
title Hospital competition under patient inertia: do switching costs stimulate quality provision?
spellingShingle Hospital competition under patient inertia: do switching costs stimulate quality provision?
Sá, Luís Carlos Sousa
Hospital competition
Quality
Switching costs
Patient choice
Volume-outcome effects
Altruism
title_short Hospital competition under patient inertia: do switching costs stimulate quality provision?
title_full Hospital competition under patient inertia: do switching costs stimulate quality provision?
title_fullStr Hospital competition under patient inertia: do switching costs stimulate quality provision?
title_full_unstemmed Hospital competition under patient inertia: do switching costs stimulate quality provision?
title_sort Hospital competition under patient inertia: do switching costs stimulate quality provision?
author Sá, Luís Carlos Sousa
author_facet Sá, Luís Carlos Sousa
author_role author
dc.contributor.none.fl_str_mv Universidade do Minho
dc.contributor.author.fl_str_mv Sá, Luís Carlos Sousa
dc.subject.por.fl_str_mv Hospital competition
Quality
Switching costs
Patient choice
Volume-outcome effects
Altruism
topic Hospital competition
Quality
Switching costs
Patient choice
Volume-outcome effects
Altruism
description Recent empirical evidence establishes previous use as a strong predictor of patient choice of hospital and indicates that switching costs explain a significant share of inertia in the hospital industry. In a model of competition between two semi-altruistic and horizontally differentiated hospitals with inherited demand, I investigate the effect of lower switching costs on quality provision and show that it depends on the hospitals' production technology and degree of altruism. If cost substitutability (complementarity) between quality and output is sufficiently weak (strong) relative to altruism, lower switching costs reduce quality at the high-volume hospital, average quality, and patient welfare. While milder patient preferences increase the scope for an increase in quality at both hospitals, it can only occur if hospitals are semi-altruistic. Finally, I show that the distribution of patients between hospitals matters. Even if hospital-level quality and patient welfare increase, lower switching costs may lead to lower average quality.
publishDate 2019
dc.date.none.fl_str_mv 2019
2019-01-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
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status_str publishedVersion
dc.identifier.uri.fl_str_mv https://hdl.handle.net/1822/62589
url https://hdl.handle.net/1822/62589
dc.language.iso.fl_str_mv eng
language eng
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dc.publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
publisher.none.fl_str_mv Universidade do Minho. Núcleo de Investigação em Políticas Económicas (NIPE)
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