Do Mergers Really Reduce Costs? Evidence from Hospitals
Teresa D. Harrison
Drexel University - Department of Economics & International Business
Economic Inquiry, Vol. 49, Issue 4, pp. 1054-1069, 2011
In this paper, we compare potential and realized cost savings from hospital mergers. Our approach isolates changes in realized cost savings due to different output mixes from systematic changes due to time and also provides a measure of the potential cost savings due to scale economies. Our findings suggest that economies of scale are present for merging hospitals and they realize these cost savings immediately following a merger. However, we also show that over time, cost savings from the merger decrease and the proportion of hospitals experiencing positive cost savings declines.
Number of Pages in PDF File: 16
JEL Classification: L1, I11, C14
Date posted: September 21, 2011
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