Theoretical Analysis on the Mechanism of"Signal Competition"among Public Hospitals

Fang Yi'an; Yang Li

Abstract：Objective:To analyze the special characteristics of healthcare services competition and study the mechanism of com-peting around"signals"rather than quality among public hospitals in China.Methods:Signal theory was employed for analysis.Results:The unique nature of the healthcare services market renders traditional signals ineffective:on one hand,the healthcare services price is"unknowable beforehand and incomparable afterwards",making it unable to regulate supply and demand;on the other hand,healthcare services,as credence goods,cannot be accurately assessed for quality even after use,exhibiting high un-certainty.The focused price and quality,which are not visible,while scale,equipment,etc.,as visible signals,have become the main content of hospital competition under oligopolistic administrative market structure,leading to"signal"competition.These sig-nals do not fully represent quality and may deviate from reality.However,due to the inability to eliminate inferior ones,hospitals attract-ing patients with such signals are not penalized,resulting in ineffective competition.Conclusion:Public hospitals in China compete around signals.For competition to be effective,the key is to make signals reflect true quality,empower the public to choose and penal-ize,and reduce hospitals'incentives to invest in signals.Based on this,it proposes three recommendations:promoting information dis-closure,advancing strategic purchasing,and strengthening accountability constraints.