Predicting provider entry and exit from the market

Dr. Michael Housman has developed a method for quantitatively predicting the strategic responses of hospitals and ambulatory surgical centers (ASCs) to the entry and exit of competitors from their geographic markets. This research is valuable in that it can be used by ASCs and hospitals planning to provide new service lines in a given market to better understand their competitors’ responses.

Overall, it appears that ASCs can withstand competition from hospitals better than hospitals can withstand competition from ASCs. Dr. Housman found that while hospitals had low rates of entry in markets in which ASCs or other hospitals offered overlapping services, ASCs had high rates of entry in markets regardless of whether the existing ASCs offered similar services. Hospitals were less likely to enter markets in which there were other hospitals, regardless of whether the other hospitals offered overlapping services, while the entry decisions of ASCs were not significantly affected by the entry of other ASCs offering non-overlapping services. Facility exit was likewise asymmetric. Dr. Housman found that ASCs were more likely to exit markets containing other ASCs offering overlapping services but less likely to exit markets containing other ASCs offering non-overlapping services. Meanwhile, hospitals were more likely to exit markets containing either ASCs or hospitals offering overlapping services.

To conduct this research, Dr. Housman needed to precisely measure the demand in markets. To do so, he used Healthcare Cost & Utilization Project (HCUP) data to derive quarterly procedure counts at the facility and at the county levels. This data included details such as the identities of the physicians and the facilities involved in the procedures performed. Data organized in this fashion can be used for a wide variety of applications, some of which are described in Predicting provider demand.

Dr. Housman’s research on provider entry and exit is forthcoming in Health Care Management Review, and has been presented at the conferences of AcademyHealth, the Academy of Management, and the International Health Economics Association.