Countervailing Market Power and Hospital Competition
While economic theories indicate that market power by downstream firms can potentially counteract market power upstream, antitrust policy is opaque about whether to incorporate countervailing market power in merger analyses. We use detailed national claims data from the healthcare sector to evaluate whether countervailing insurer power does indeed limit hospitals’ exercise of market power. We estimate willingness-to-pay models to evaluate hospital market power across analysis areas. We find that countervailing market power is important: a typical hospital merger would raise hospital prices 4.3% at the 25th percentile of insurer concentration but only 0.97% at the 75th percentile of insurer concentration.
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Copy CitationEric Barrette, Gautam Gowrisankaran, and Robert Town, "Countervailing Market Power and Hospital Competition," NBER Working Paper 27005 (2020), https://doi.org/10.3386/w27005.Download Citation
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Non-Technical Summaries
- A typical hospital merger would raise the price of an average hospital stay by 4.3 percent in a market at the 25th percentile of...
Published Versions
Eric Barrette & Gautam Gowrisankaran & Robert Town, 2022. "Countervailing Market Power and Hospital Competition," The Review of Economics and Statistics, vol 104(6), pages 1351-1360.
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