Exercise # 3:
The dataset (from Exercise #1) provides a Herfindahl–Hirschman Index variable, and Herfindahl index categories, please use the herf_cat variable and answer the questions below:
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. However, you will need to understand completely what the HHI is, in order to correctly interpret the results of your analysis in this exercise and write your analysis report well. In your data, herf_cat of 0 = ‘High’, 1 = ‘Moderate’, 2 = ‘Low’
Present your method of analysis under the header “METHOD”. Under that header, present your step-by-step procedure or specify the R-script that you used for your data analysis.
Use the dataset from Exercise #1. Analyze the data to obtain results to complete Table 3 below. Use those results in Table 3 to 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 the ANOVA test)
- Use density curve graphs and compare hospital costs and revenues between the three markets.
- (a) What is the impact of being in a high-competitive market on hospital revenues and costs? (b) Do you think being in a high-competitive market has a positive impact on net hospital benefits? (c) What about the number of Medicare and Medicaid discharges? (d) Do you think hospitals in a higher competitive market are more likely to accept Medicare and Medicaid patients? (e) What is the impact of any other variables? (f) Please report your findings. Then (g) discuss the impact of your findings in 2 paragraphs.
- Note: to answer questions 4(a) through 4(f), please compute the “Medicare-discharge ratio” and the “Medicaid-discharge ratio” first, and then run two t-tests, comparing high vs. moderate and comparing high vs. low competitive markets. Create a simple table (Table 3A) to report your findings. Please in your analysis report, support your findings by creating simple box-plot graphs.
Table 3. Comparing hospital characteristics and market competitiveness, 2011 and 2012
High Competitive Market
Moderate Competitive Market
- Number of Hospital beds
- Number of paid Employee
- Number of non-paid Employees
- Interns and Residents
- System Membership
- Total hospital cost
- Total hospital revenues
- Hospital net benefit
- Available Medicare days
- Available Medicaid days
- Total Hospital Discharge
- Medicare discharge
- Medicaid discharge
14. Herfindahl index
You may use an Analysis ToolPak or use R with RStudio for your calculations. It is mandatory that you use analytical software tools for your calculations. Excel may also be used for all graphs. Make sure to include (insert) the plotted information (the graphs) in your analysis report.
(BONUS points: RStudio script is available for this exercise, but you need to modify it for use in this analysis)
Download data from here: HMGT400HOSP
Download codes for E2 from here: E3-codes-dplyr
Download codes for E2 from here: E3-codes-no-dplyr