Working Paper: NBER ID: w22106
Authors: Leemore Dafny; Kate Ho; Robin S. Lee
Abstract: 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.
Keywords: hospital mergers; cross-market mergers; healthcare prices; bargaining dynamics
JEL Codes: I11; L10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mergers of hospitals within the same state but across different local markets (H79) | Price increases for acquirers (D49) |
| Mergers involving hospitals from different states (I19) | No statistically significant price increases (P22) |
| Merging hospitals (I19) | Changes in negotiated prices with insurers (D49) |
| Common insurers (G52) | Amplified effects of mergers on prices (L11) |