Hospital Market Structure and Medical Collections

• In Event: Health Financing and Spending

Abstract

Medical collections are a major issue for U.S. consumers, with 14\% of individuals with a credit report owing medical debt to a debt collector as of 2023. Previous research has shown that market structure has important implications for hospital prices, which in turn affect medical bills, thus it is likely that market structure also plays an important role in determining which geographic areas have more medical collections. However, no research to date has examined the impact of hospital market structure on medical debt in collections.

To inform our empirical analysis of the relationship between hospital market structure and medical debt, we first develop a Salop-style model of hospitals, insurers, and consumers. The primary prediction of our model is that as the number of hospitals in a market increases, total medical debt decreases. However, as the fraction of the population with insurance in a market increases, total medical debt increases, as the presence of insurers exerts upward pressure on healthcare prices, which in turn leads to upward pressure on insurance premiums.

For our empirical analysis, we combine survey data from the American Hospital Association and individual-level data on medical collections from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel from 2007 to 2011. We follow Cooper, Craig, Gaynor, and Van Reenen (2019) and construct measures of hospital market structure to examine how medical collections varies across market types.

Our preliminary results show strong cross-sectional differences in medical debt across hospital market structures. Counties characterized by monopoly hospital markets exhibit an average aggregate medical collection balance of approximately \$678 per person, compared to only \$441 in oligopoly counties, indicating a substantially higher likelihood of accruing medical debt in less competitive markets. Patterns in flow measures of medical balances (past 12 months) mirror these differences, suggesting persistent disparities in both the stock and accumulation of medical debt across market structure types. Similarly, the share of consumers with medical collections is approximately 30 percent in monopoly counties versus 23 percent in oligopoly counties. A spatial analysis of medical collections by hospital referral region (HRR) for 2011, following Cooper et al. (2019), further reveals a pronounced geographic concentration of medical debt in the South and Southeast regions of the United States.

Author

• Nathan E Blascak, Federal Reserve Bank of Philadelphia
  Presenting Author