The Importance of Technology in the Consolidation of Hospital Markets - The Case of the United States

Abstract

Over the last few years technology has become a key element of competition in the hospital market. At the same time this market in the US has seen intense merger activity. In this study we analyze the role that technology can play in this consolidation wave by focusing on how it can affect a hospital's selection of a particular target. We analyze the selection of targets in mergers that took place in the US hospital market between 1985 and 2000. Our results show that technology is an important element for competition in the hospital market and, as such, also plays a relevant role in M&A strategies. We find that hospitals are more likely to choose targets that complement their technology base, especially when the acquired technologies are complex and have favourable cost/benefit ratios. As a result, the merged entity tends to become closer to a one-stop-shop hospital.

Keywords: hospital, technology, merger, acquisition, complexity