The Price Effects of Cross-Market Hospital Mergers
We consider the effect of mergers between firms whose products are not viewed as direct substitutes for the same good or service, but are bundled by a common intermediary. Focusing on hospital mergers across distinct geographic markets, we show that such combinations can reduce competition among merging hospitals for inclusion in insurers' networks, leading to higher prices (or lower-quality care). Using data on hospital mergers from 1996-2012, we find support that this mechanism operates within state boundaries: cross-market, within-state hospital mergers yield price increases of 7-9 percent for acquiring hospitals, whereas out of state acquisitions do not yield significant increases.
Document Object Identifier (DOI): 10.3386/w22106
Published: Leemore Dafny, Kate Ho, Robin S. Lee. "The price effects of cross‐market mergers: theory and evidence from the hospital industry." Rand Journal of Economics, Volume 50, Issue 2 Summer 2019 Pages 286-325
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