Has the nature of hospital competition changed from a medical arms race in
which hospitals compete for patients by offering their doctors high quality
services to a price war for the patients of payers? This paper uses time-s
eries cross-sectional methods on California hospital discharge data from 19
86-1994 to show the association of hospital prices with measures of market
concentration changed steadily over this period, with prices now higher in
less competitive areas, even for non-profit hospitals. Regression results a
re used to simulate the price impact of hypothetical hospital mergers. (C)
1999 Elsevier Science B.V. All rights reserved.