Researcher finds that competition lowers quality of care in hospitals

JUNE 29, 2020 — Competition is typically good for consumers. But according to research from UTSA’s College of Business faculty member Deepa Wani, competition actually lowers the quality of care in hospitals.

Her paper, “Impact of Competition on Process of Care and Resource Investments,” was named a runner-up in the Journal of Operations Management best paper competition.

Wani, an assistant professor of management science and statistics, and her co-authors utilized state-of-the-art econometric techniques to analyze seven years of data from California hospitals for her research.

“The health care landscape is changing rapidly,” said Wani. “It is a rich environment because hospital and patient-level data is readily available and that allows us to test theories empirically.”

“We are trying to connect the dots to see how health care can become more efficient while providing high quality of care.”

Wani’s research addressed two areas: how competition affects the process of care (PoC) in hospitals and how competition affects investments in resources such as nurses and technology that can potentially improve PoC.

Hospitals tend to compete locally for their clients. But unlike choosing the best hotel room, appearances are not the best way to judge a hospital’s care outcomes. Since it is hard for potential patients to judge hospitals based on quality of care attributes, hospitals tend to make investments that differentiate them in order to attract patients.

“Most patients do not have the technical knowledge to judge quality of care,” said Wani, who is also researching how patients make health care choices. “Patients tend to focus on interpersonal aspects and observable amenities. But if they collaborate with their surgeons, the choices reflect the more technical aspects of the hospitals.”

Using the data, Wani found that competition is negatively associated with quality of care.

“Observable attributes of quality may be more important to executives in more competitive markets than PoC, which may either be unobservable or less understood by consumers,” said Wani.

But while quality of care is lower in more competitive markets, Wani found that PoC has improved over time, which is encouraging. 

A key takeaway from the study is that executives should focus on investing in technical resources and systems that are beneficial for patient care in the long run, rather than investing in piecemeal projects that have questionable benefits and may be nonessential in improving PoC.

“Using data-driven research, we are trying to connect the dots to see how health care can become more efficient while providing high quality of care,” said Wani. “But unlike efficiencies in traditional manufacturing operations, health care is very individualized. What works for one person might not work the same for others.”

Are you making the right decision? Are you choosing the right hospital? How accurate are the reviews? Wani has found that the more you dig into it, the more questions it raises. Which for a consumer might not be a good answer, but as a researcher, it is grounds for even more valuable research.

— Wendy Frost