Volume-Outcome and Its Impact on U.S. Health Care Markets (Paperback, illustrated edition)

The direction of causality matters for policy procedure. If volume causes outcome, then policies supporting centralization of procedures in a few facilities may make sense. Specialty hospitals may have the benefit of producing better outcomes. Antitrust analysis of hospital mergers should probably consider any improved outcomes when evaluating the impact of the merger. Accordingly, the author analyzes the causality of the volume-outcome relationship for coronary artery bypass grafts (CABGs) and finds that volume might play the crucial role for hospitals quality. This finding makes minimum volume requirements a reasonable policy which is shown by a simulation on Californian data. However, the primary focus of the finding lies in US Antitrust application. Due to a causative volume-outcome relationship, a hospital merger may have welfare enhancing effects despite possible price increases. Patients will be better off as long as the quality improvement outweighs the loss of welfare due to the price increase. This is shown by a standard merger case simulation as well as a real merger, which took place in California in 1999. Results suggest that the presence of a volume-outcome relationship might serve as an efficiency defense at Antitrust trials.