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The US health care system relies on competition in the provider and health insurer markets to lower costs and improve quality. However, the market concentration of hospitals and insurers has been a matter of concern for several decades.1-6 More recently, Martin Gaynor and colleagues reviewed studies of the competitive landscape of hospitals, health insurers, and physician services and found that hospital and health insurer markets have become more concentrated since the 1990s.7
To measure market concentration, the Antitrust Division of the Department of Justice (DOJ) and Federal Trade Commission (FTC) often use the Herfindahl-Hirschman Index (HHI), which is calculated by squaring the market shares of each firm competing in a market and summing those values across all firms, resulting in a range from 0 to 10,000.8 Gaynor and colleagues reported that 65 percent of Metropolitan Statistical Areas (MSAs) had highly concentrated hospital markets (those with HHIs greater than 2,500) in 1990, and that share had increased to 77 percent by 2006.7 By way of example, an HHI of 2,500 could result from each of four firms...