October 16, 1987

Competition and the Cost of Hospital Care

Author Affiliations

Group Health Cooperative Seattle

Group Health Cooperative Seattle

JAMA. 1987;258(15):2065. doi:10.1001/jama.1987.03400150056023

To the Editor.—  Robinson and Luft1 have done us a service by confirming the hypothesis that nonprice competition increased hospital per admission and per diem costs during the 1970s. Nonetheless, their data and their conclusions are both premature.In most parts of the country, price competition did not really take hold until after 1982. Significant changes in the incentives built into government and private health insurance plans, the development of preferred provider organizations, and effective demands for discounts from hospitals did not take place until the last two or three years. So we are only now beginning to see some real price competition among hospitals, and it is certainly too soon to know what its effect will be on hospital costs.Per admission and per diem costs are poor measures of the impact of competition on hospital costs. As insurance plans succeed in getting physicians to reduce their use