Defining hospital markets – an application to the German hospital sector

TL;DR

This study examines how to define hospital markets in Germany, finding that market concentration varies based on how product and geographic markets are defined.

Contribution

The study provides new empirical evidence on the structure of the German hospital market and the impact of market definitions.

Findings

The German hospital sector is highly concentrated, consistent with prior research.

Using broad product market definitions like 'acute in-patient care' hides significant variations in market concentration by diagnosis.

Geographic market thresholds affect concentration levels but not the overall correlation.

Abstract

The correct definition of the product market and of the geographic market is a prerequisite for assessing market structures in antitrust cases. For hospital markets, both dimensions are controversially discussed in the literature. Using data for the German hospital market we aim at elaborating the need for differentiating the product market and at investigating the effects of different thresholds for the delineation of the geographic market based on patient flows. Thereby we contribute to the scarce empirical evidence on the structure of the German hospital market. We find that the German hospital sector is highly concentrated, confirming the results of a singular prior study. Furthermore, using a very general product market definition such as “acute in-patient care” averages out severe discrepancies that become visible when concentration is considered on the level of individual diagnoses. In contrast, varying thresholds for the definition of the geographic market has only impact on the level of concentration, while the correlation remains high. Our results underline the need for more empirical research concerning the definition of the product market for hospital services.

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