Download This PaperCountervailing Market Power and Hospital Competition
38 Pages Posted: 20 Apr 2020 Last revised: 16 Apr 2026
Date Written: April 2020
Abstract
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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