Chapter 1. Hospital Quality Competition. A review of the Theoretical Literature

Brekke K. R., Gravelle H., Siciliani L., and Straume O. R.
Pages 25-67

Policies to promote competition amongst hospitals have been introduced in
many countries as a means of improving quality. The rationale is that when
hospitals face fixed prices they can only attract additional patients by increasing
quality and intensified competition increases the effect of quality on demand.
We review theoretical models of hospital competition to examine this argu-
ment and explain how the effect of competition on quality is sensitive to the
degree of hospital altruism, profit constraints, cost structures, the degree of
specialisation, soft budgets, and sluggish demand adjustments.