The Effect of Competition on the Supply of Specialized Substance Abuse Treatment Services in the US

This paper examines the effect of competition on the supply of specialized substance abuse treatment services (SPESER) in the US. Cross-sectional data on 7,368 substance abuse providers across 359 metropolitan areas were used in the analyses. The results showed that competition increases the supply of SPESER by about 10%. However, when data were analyzed using hierarchical linear models (HLM), competition only increases the supply of SPESER by 5%. Moreover, when characteristics of the provider were included, competition was no longer statistically significant. These results suggest that policymakers should not always expect that competition will increase supply of services.