Exercise # 3:
The dataset provides Herfindahl–Hirschman Index, and Herfindahl 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:
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:
- Compare the following information between hospitals located in high, moderate and low competitive markets? (table 1)
- What are the main significant differences between hospitals in different markets? (use ANOVA test)
- Use the density curves and compare hospitals cost and revenues between three markets.
- What is the impact of being in a high-competitive market on hospital revenues and cost? Do you think being in a high-competitive market has a positive impact on net hospital benefits? What about the number of Medicare and Medicaid discharge? Do you think hospitals in a higher completive market more likely to accept more Medicare and Medicaid patients? What is the impact of other variables? Please discuss your findings in 1-2 paragraphs.
Expert Solution Preview
Introduction: In this exercise, we will be using the Herfindahl-Hirschman Index to compare information between hospitals located in high, moderate, and low competitive markets. We will also be using ANOVA test and density curves to analyze the main significant differences between hospitals in different markets and compare hospital costs and revenues between three markets. Finally, we will be discussing the impact of being in a high-competitive market on hospital revenues and costs, net hospital benefits, and the number of Medicare and Medicaid discharges, as well as the impact of other variables.
1. To compare the information between hospitals located in high, moderate, and low competitive markets, we can look at Table 1. We can compare the mean of hospital cost and revenue for hospitals in each market using descriptive statistics. We can also compare the number of Medicare and Medicaid discharges for hospitals in each market.
2. To determine the main significant differences between hospitals in different markets, we can use ANOVA test. ANOVA test is used to compare the means of three or more groups to determine if they are statistically different or not. In this case, we can compare the means of hospital cost, revenue, and number of Medicare and Medicaid discharges for hospitals in high, moderate, and low competitive markets. By doing so, we can identify which variables are statistically significant and have the most impact on the market.
3. To compare hospital costs and revenues between three markets, we can use density curves. Density curves are a graphical representation of data that show the distribution of data over a continuous interval. By overlaying the density curves of hospital costs and revenues for each market, we can compare the shapes and locations of the curves to see how the distributions differ between the markets.
4. Being in a high-competitive market can have both positive and negative impacts on hospital revenues and costs. While competition can lead to lower prices, it can also lead to higher marketing costs and lower profits for hospitals. Additionally, hospitals in higher competitive markets may be more likely to accept Medicare and Medicaid patients to remain competitive. Other variables that may impact hospital revenue and cost include size, location, and patient demographics. By analyzing these variables, we can have a better understanding of the impact of being in a high competitive market on hospitals.