Comment on Joseph Farrell, David J. Balan, Keith Brand, Brett W. Wendling (2011), 'Economics at the FTC: Hospital Mergers, Authorized Generic Drugs, and Consumer Credit Markets'

15 Pages Posted: 4 May 2012 Last revised: 19 Sep 2014

See all articles by Bryan Keating

Bryan Keating

Compass Lexecon

Robert Willig

Princeton University - Princeton School of Public and International Affairs

Margaret Guerin-Calvert

Compass Lexecon

Nauman Ilias

Compass Lexecon

Date Written: June 19, 2012

Abstract

In a review of “Economics at the FTC,” Farrell et al. (2011) discuss empirical methods FTC economists use to assess the potential price effects of prospective hospital mergers. The primary method is a framework based on proxies for the bargaining power of hospitals that are calculated from the estimated parameters of a model of patient hospital choice. The effect of these proxies for bargaining power on the reimbursement rates obtained by hospitals in negotiations with payors is then estimated using a reduced form specification. We discuss the limitations of this framework, and provide a few examples in which it may fail to predict the price effects of hospital mergers reliably, especially in the presence of restricted insurance networks.

Suggested Citation

Keating, Bryan and Willig, Robert D. and Guerin-Calvert, Margaret and Ilias, Nauman, Comment on Joseph Farrell, David J. Balan, Keith Brand, Brett W. Wendling (2011), 'Economics at the FTC: Hospital Mergers, Authorized Generic Drugs, and Consumer Credit Markets' (June 19, 2012). Available at SSRN: https://ssrn.com/abstract=2051028 or http://dx.doi.org/10.2139/ssrn.2051028

Bryan Keating (Contact Author)

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Robert D. Willig

Princeton University - Princeton School of Public and International Affairs ( email )

401 Robertson Hall
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609-258-4843 (Phone)
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Margaret Guerin-Calvert

Compass Lexecon ( email )

United States

Nauman Ilias

Compass Lexecon ( email )

United States

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