An empirical analysis of exits from the hospital market

Objectives: Using the termination of the NHI contracts as a proxy for exit from the hospital market, this study investigated the factors that affect exits from the hospital industry, and compared these factors before and after implementation of the Global Budget Scheme (GBS) in July 2002. Methods: The data, including metropolitan and local community hospitals, were extracted from the NHI Research Database from 1998-2012. We divided samples into two parts (before the GBS [1998-2002] and after the GBS [2003-2012]), and used a Cox proportional hazards regression model to conduct our analysis. Results: The factors that affect exits from the hospital industry include the following: (1) characteristics of hospitals, such as the duration of hospitals, outpatient visit volume, and admission volume; and (2) characteristics of areas, such as the rate of entry last year, minimum efficient scale, proportion of aged population, disposable income per household, and population. After implementation of the GBS, ownership of the local community hospital, the Herfindahl-Hirschman index, the average current land value per hectare, the number of outpatient visits, and the admission growth rate became significant factors of exit from the hospital industry. Conclusions: After the implementation of the GBS, market competition and ownership of hospitals affect the exiting of hospitals. There is a more unbalanced development among large- and small-scale hospitals.