Competition and quality in home health care markets

Abstract

Market-based solutions are often proposed to improve health care quality; yet evidence on the role of competition in quality in non-hospital settings is sparse. We examine the relationship between competition and quality in home health care. This market is different from other markets in that service delivery takes place in patients' homes, which implies low costs of market entry and exit for agencies. We use 6 years of panel data for Medicare beneficiaries during the early 2000s. We identify the competition effect from within-market variation in competition over time. We analyze three quality measures: functional improvements, the number of home health visits, and discharges without hospitalization. We find that the relationship between competition and home health quality is nonlinear and its pattern differs by quality measure. Competition has positive effects on functional improvements and the number of visits in most ranges, but in the most competitive markets, functional outcomes and the number of visits slightly drop. Competition has a negative effect on discharges without hospitalization that is strongest in the most competitive markets. This finding is different from prior research on hospital markets and suggests that market-specific environments should be considered in developing polices to promote competition.

Keywords: competition; home health care markets; quality of care.

Figure A1

Predicted quality scores from fixed effects models using Herfindahl Index * HHI: Predicted Herfindahl Index; Zip-level and county-level cut-off values are: HHI ≤ 10,000 and HHI ≤ 10,000 (decile 1), HHI ≤ 4,862 and HHI ≤ 4,168 (decile 2), HHI ≤ 3,720 and HHI ≤ 3,043 (decile 3), HHI ≤ 2,455 and HHI ≤ 2,364 (decile 4), HHI ≤ 1,950 and HHI ≤ 1,822 (decile 5), HHI ≤ 1,604 and HHI ≤ 1,399 (decile 6), HHI ≤ 1,302 and HHI ≤ 1,066 (decile 7), HHI ≤ 1,093 and HHI ≤ 835 (decile 8), HHI ≤ 950 and HHI ≤ 585 (decile 9), and HHI ≤ 575 and HHI ≤ 306 (decile 10).

Figure A2

Predicted quality scores from fixed effects models using number of agencies * Zip-level and county-level cut-off values are: N ≤ 3 and N ≤ 7 (decile 1), N ≤ 4 and N ≤ 10 (decile 2), N ≤ 5 and N ≤ 14 (decile 3), N ≤ 6 and N ≤ 18 (decile 4), N ≤ 7 and N ≤ 24 (decile 5), N ≤ 8 and N ≤ 31 (decile 6), N ≤ 11 and N ≤ 40 (decile 7), N ≤ 14 and N ≤ 56 (decile 8), N ≤ 19 and N ≤ 122 (decile 9), and N ≤ 58 and N ≤ 378 (decile 10).

Figure A3

Predicted quality scores for hospital-discharged and community-based patients * HHI: Predicted Herfindahl Index

Figure A4

Predicted quality scores from analysis of patients with congestive heart failure * HHI: Predicted Herfindahl Index

Figure 1

Unadjusted quality scores by competition.

Figure 2

Predicted quality scores from fixed effects models by competition.

Figure 3

Predicted quality scores by competition by Certificate of Need (CON) status.