hmgt 400 exercise 4

Alesix Tieku

HMGT 400 (7980)

Professor Hossein Zare

April 05, 2019

Week 3 Exercise:

The dataset provides Herfindahl–Hirschman Index, and herfindahel index categories, please use the herf_cat variable and answer the following questions:

Note: “The Herfindahl–Hirschman Index is a commonly accepted measure of market concentration used by antitrust enforcement agencies and scholars in the field. The HHI is calculated by squaring the market share of each firm competing in the market and then summing the resulting numbers” (NASI, 2015; pp: 14-16). read more from here:

https://www.urban.org/sites/default/files/publication/50116/2000212-Addressing-Pricing-Power-in-Health-Care-Markets.pdf

For this exercise you do not need to compute the HHI, but if you have any questions, please do not hesitate to ask me, but try to learn more about this you will need that to report your findings.

Use the dataset from week1 exercise and then answer the following questions:

1. Compare the following information between hospitals located in high, moderate and low competitive markets? (table 1)

Table 3. Comparing hospital characteristics and market, 2011 and 2012

Variables	High Competitive Market	Moderate Competitive Market	Low Competitive Market	ANOVA (results)
	N	Mean	STD	N	Mean	STD	N	Mean	STD
Hospital Characteristics
Hospital beds	219	130.9178	386.1857	1332	420.5188	594.2665	1479	373.6403	562.2281	F value=6.3724 P value=0.01164
Number of paid Employee	219	499.8935	813.2644	1324	1570.1115	1954.9221	1470	1308.9686	1722.4468	F value=3.0271 P value=0.08198
Number of non-paid Employee	0	Null	Null	25	35.87832	30.50019	35	47.00928	97.11851	F value=0.3055 P value=0.5826
Internes and Residents	22	38.32182	45.60323	423	112.20558	176.11024	480	86.55375	149.89660	F value=1.9973 P value=0.1579
System Membership	219	0.4246575	0.4954233	1332	0.6073574	0.4885218	1479	0.6315078	0.4825590	F value=21.572 P value=3.553e-06
Total hospital cost	219	73687086	121326585	1332	255520655	341985822	1479	201077823	267368743	F value=0.83 P value=0.3623
Total hospital revenues	219	17.48018	1.029278	1332	18.71215	1.461939	1479	18.39917	1.627141	F value=4.4126 P value=0.03576
Hospital net benefit	219	4013058	19021599	1332	15320472	39434375	1479	13353106	41078313	F value=1.8043 P value=0.1793
Available Medicare days	219	5377.214	9993.885	1324	18983.776	20297.62	1472	16792.697	19219.182	F value=12.292 P value=0.0004616
Available Medicaid days	217	1416.413	4429.091	1317	6553.995	10676.835	1451	4812.455	8164.626	F value=0.0876 P value=0.7673
Total Hospital Discharge	219	2607.836	5065.392	1326	11100.959	11741.300	1472	9120.806	10397.483	F value=6.1548 P value=0.01316
Medicare discharge	219	1067.938	1753.820	1324	3781.610	3652.702	1472	3435.407	3623.243	F value=19.615 P value=9.81e-06
Medicaid discharge	217	309.8802	748.9359	1334	1324.1560	1961.7498	1448	1066.6464	1605.2900	F value=2.4087 P value=0.1208
Herfindahel index	219	1.963470	0.1880338	1332	1.668919	0.6663497	1479	1.697769	0.6392140	F value=9.3585 P value=0.002239

2. What are the main significant differences between hospitals in different markets? (use Anova test)

Hypothesis statement

H0: There is no significant difference between the three competitive market levels

H1: There is a significant difference between the competitive market levels

The main significant difference among the three different markets are on variables Hospital beds, System membership, total hospital revenues, Available medical days, Total hospital discharge, Medicare discharge and Herfindahel index. On these 7 variables the P values are less than the level of significance of 0.05 in all cases, therefore we reject the null hypothesis and conclude that there is a significant difference in the three market levels on these 7 variables. On the rest on the variables the P value of the Anova tests is greater than the level of significance of 0.05 hence we do not reject the null hypothesis and therefore conclude that there is no significant difference.

3. Use the density curves and compare hospitals cost and revenues between three markets.

For hospital cost as competition reduces the mean of the total hospital increases. This is evident by the decreasing frequency on figure 5.

For the hospital revenue, from the descriptive statistics it is clear high competitive have markets have the least revenue and moderate competitive markets have the greatest revenue. This has clearly been brought out by the distribution on figure 6.

4. What is the impact of being in high-competitive market on hospital revenues and cost? Do you think being in high-competitive market has positive impact on net hospital benefits? What about the number of Medicare and Medicaid discharge? Do you think hospitals in higher completive market more likely to accept more Medicare and Medicaid patients? What are the impact of other variables? Please discuss your findings in 1-2 paragraphs

(Note: to answer to the last question, please compute the ratio-medicare-discharge and ratio-medicaid-discharge first and then run 2 ttest ) high vs. moderate and high vs. low competitive market), please support your findings with box-plot

In high competitive market both the total hospital cost mean and the total hospital revenue mean are lowest compared to the other two levels of market. This implies that” a high competitive market leads to low hospital cost and subsequent low revenue. This is despite the fact that Anova test shows that total hospital cost shows there is no significant difference in the three market levels while total hospital revenue shows a significant difference.

The mean net hospital benefit in high competitive market is 4,013,058, that of moderate competitive market is 15,320,472 and in low competitive market is 13,353,106. It is very clear that net hospital benefit is lowest in high competitive market from the mean. This implies that a high competitive market does not have a positive impact on the net hospital benefit. Despite this, there is no significant difference in net hospital benefit in the three competitive market levels.

The medicare discharge is lowest at the highest competitive market level(0) and greatest at moderate competition market level (1)

The medicaid discharge is lowest at the highest competitive market level (0) and greatest at moderate competition market level (1) although the difference in moderate competitive market level (1) and low competitive level (2) is minimal.

I believe hospitals in higher competitive market are more likely to accept more Medicare and Medicaid patients due to the low mean discharges at the high competitive market which implies there should be room to accept more Medicare and Medicaid discharges