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Competition in Outpatient Procedure Markets

Baker, Laurence C., PhD; Bundorf, M.K., PhD; Kessler, Daniel P., PhD

doi: 10.1097/MLR.0000000000001003
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Background: More than half of all medical procedures performed in the United States occur in an outpatient setting, yet few studies have explored how competition among ambulatory surgery centers (ASCs) and hospitals affects prices for commercially insured outpatient services.

Objectives: We examined the association between prices for commercially insured outpatient procedures and competition among ASCs and hospitals.

Research Design: Using claims from the Health Care Cost Institute for 2008–2012, we constructed county-level price indices for outpatient procedures in hospital outpatient departments and ASCs. Using regression analysis, we estimated the association between prices and ASC availability, outpatient and inpatient hospital competition, hospital/physician integration, and several other hospital market characteristics. Our estimates were identified from changes within counties over time.

Results: First, ASC availability was associated with decreases in overall outpatient procedure prices, mostly due to reductions in the prices paid to hospital outpatient departments. Second, competition among hospitals was also associated with decreases in outpatient procedure prices—and had an effect more than twice as large as the effect of ASC availability. Third, competition among ASCs was also associated with reductions in the prices paid to other ASCs.

Conclusions: Our results suggest that competition from ASCs benefits consumers through lower prices for outpatient procedures. Any conclusions about the broader welfare implications of the rise in ASCs, however, must balance the price reductions that we found with the volume increases found in previous work, particularly the volume increases at physician-owned ASCs.

Stanford University and the National Bureau of Economic Research, Stanford, CA

L.C.B.: in the last 3 years received consulting fees from the California Health Care Foundation, the American Hospital Association, the National Institute for Health Care Management, LabCorp of America, Quality Systems Inc., Kaiser Permanente and other health insurers, hospitals and producers of medical supplies and equipment, and Cornerstone Research. Received grant support from the American Heart Association, the National Institutes of Health, the Agency for Healthcare Research and Quality, the Robert Wood Johnson Foundation, and the National Institute for Health Care Management. Senior advisor at Cornerstone Research, a provider of litigation consulting services. M.K.B.: in the last 3 years, received consulting fees from AON Service Corporation and Quinn Emanuel Urquhart and Sullivan, LLP. Received grant support from the Agency for Healthcare Research and Quality, the National Institute of Health Care Management, the Patient Centered Outcomes Research Institute, and the Robert Wood Johnson Foundation. D.P.K.: in the last 3 years, received speaking and/or consulting fees from insurers, actuarial firms, hospitals, pharmaceutical manufactures, and providers of other health services. Senior advisor at Cornerstone Research, a provider of litigation consulting services.

Reprints: Daniel P. Kessler, PhD, Stanford University, 434 Galvez Mall, Stanford, CA 94305. E-mail: fkessler@stanford.edu.

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