The Effects of Competition and Regulation on Hospital Bed Supply and the Reservation Quality of the Hospital

A simple queuing model is used to examine several factors that affect hospital bed supply decisions and the reservation quality of the hospital and indicates that hospital reserve margins vary directly with the extent of interhospital competition and inversely with the intensity of hospital regulation.

Abstract

This article uses a simple queuing model to examine several factors that affect hospital bed supply decisions and the reservation quality of the hospital. The model takes account of demand uncertainty, the internal organization of the hospital, nonprice competition among hospitals, and hospital regulation. The empirical work indicates that hospital reserve margins vary directly with the extent of interhospital competition and inversely with the intensity of hospital regulation. Estimates of the reservation quality of the hospital are shown to depend critically on assumptions about internal organization of hospitals and the ways in which hospital utilization varies over the year.