TY - JOUR AU - Town,Robert AU - Wholey,Douglas AU - Feldman,Roger AU - Burns,Lawton R. TI - The Welfare Consequences of Hospital Mergers JF - National Bureau of Economic Research Working Paper Series VL - No. 12244 PY - 2006 Y2 - May 2006 UR - http://www.nber.org/papers/w12244 L1 - http://www.nber.org/papers/w12244.pdf N1 - Author contact info: Robert Town Health Care Management Department The Wharton School University of Pennsylvania 3641 Locust Walk Philadelphia, PA 19104 E-Mail: rtown@wharton.upenn.edu Douglas Wholey Health Services Research and Policy School of Public Health University of Minnesota Mayo Mail Code 729, 420 Delaware Street S.E. Minneapolis, MN 55455-0392 E-Mail: whole001@umn.edu Roger Feldman Health Policy and Management School of Public Health University of Minnesota Mayo Mail Code 729 420 Delware Street S.E. Minneapolis, MN 55455-0392 E-Mail: feldm002@umn.edu Lawton Burns Health Care Systems Department The Wharton School University of Pennsylvania 203 Colonial Penn Center 641 Locust Walk Philadelphia, PA 19104-6218 E-Mail: burnsl@wharton.upenn.edu M2 - featured in NBER digest on 2006-05-15 AB - In the 1990s the US hospital industry consolidated. This paper estimates the impact of the wave of hospital mergers on welfare focusing on the impact on consumer surplus for the under-65 population. For the purposes of quantifying the price impact of consolidations, hospitals are modeled as an input to the production of health insurance for the under-65 population. The estimates indicate that the aggregate magnitude of the impact of hospital mergers is modest but not trivial. In 2001, average HMO premiums are estimated to be 3.2% higher than they would have been absent any hospital merger activity during the 1990s. In 2003, we estimate that because of hospital mergers private insurance rolls declined by approximately .3 percentage points or approximately 695,000 lives with the vast majority of those who lost private insurance joining the ranks of the uninsured. Our estimates imply that hospital mergers resulted in a cumulative consumer surplus loss of over $42.2 billion between 1990 and 2001. It is estimated that all but a modest $95.4 million of the loss in consumer surplus is transferred from consumers to providers. ER -