Do Mergers Really Reduce Costs? Evidence from Hospitals
16 Pages Posted: 21 Sep 2011
Date Written: October 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.
JEL Classification: L1, I11, C14
Suggested Citation: Suggested Citation