Rural Hospital Mergers, Antitrust Policy, and the Ukiah Case

Posted: 9 Mar 1999

See all articles by Erwin A. Blackstone

Erwin A. Blackstone

Temple University - Department of Economics

Joseph P. Fuhr

Widener University - Department of Economics, Finance & Marketing

Abstract

This article examines the antitrust issues in rural hospital mergers by focusing on an important antitrust case involving the merger of two small hospitals in Ukiah, California. A key issue in this matter was whether the geographic market served by the merger included a nearby larger city. The economic efficiency of small rural hospitals and the competitive implications of their mergers are examined in the context of the Ukiah case. Economies of scale are shown to be important for small rural hospitals and should mitigate any increase in price. The efficiencies defense is shown to be difficult to make even when economies of scale make the likelihood of efficiencies high. The financial difficulties of many rural hospitals, especially in areas where too many exist, mean that mergers such as this one in Ukiah often are an efficient way to keep these hospitals financially sound and accessible. The Ukiah case suggests the desirability of the merger guidelines that permit most mergers of small rural hospitals.

JEL Classification: I11, I18

Suggested Citation

Blackstone, Erwin A. and Fuhr, Joseph P., Rural Hospital Mergers, Antitrust Policy, and the Ukiah Case. Available at SSRN: https://ssrn.com/abstract=155050

Erwin A. Blackstone

Temple University - Department of Economics ( email )

Fox School of Business and Management
807 Ritter Annex
Philadelphia, PA 19122
United States
(215) 204-5027 (Phone)

HOME PAGE: http://www.sbm.temple.edu/~eablacks/

Joseph P. Fuhr (Contact Author)

Widener University - Department of Economics, Finance & Marketing ( email )

One University Place
Chester, PA 19013
United States
610-499-1172 (Phone)

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