The Effect of Competition on Process and Outcome Quality of Hospital Care in the Netherlands

Abstract

We examine the impact of competition on outcome and process indicators of hospital quality. While earlier literature on the relationship between competition and hospital quality mainly focused on outcome indicators, we argue that the inclusion of process indicators in the analysis can provide supplementary information about the effect of competitive pressure on hospitals’ incentives. In particular, these indicators are less noisy than outcome indicators and are important as a management tool. Our panel dataset covers all Dutch general and academic hospitals in the period 2004–2008, during which the transparency of hospital quality information increased substantially due to the disclosure of hospitals’ quality indicators. We find that competition among hospitals located within the hospital catchment area explains differences in several process indicators, but fails to explain differences in outcome indicators. The results suggest that hospitals facing more competition organize diagnostic processes more efficiently; however, they have more operation cancellations at short notice and more delays of hip fracture injury operations for elderly patients. This suggests that competition affects the allocation of hospital personnel efforts even when outcomes have not been affected.