The Price Effects of Cross-Market Hospital Mergers

55 Pages Posted: 21 Mar 2016 Last revised: 28 May 2022

See all articles by Leemore S. Dafny

Leemore S. Dafny

Northwestern University - Department of Management & Strategy; National Bureau of Economic Research (NBER)

Kate Ho

National Bureau of Economic Research (NBER); Princeton University - Department of Economics

Robin S. Lee

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: March 2016

Abstract

We consider the effect of mergers between firms whose products are not viewed as direct substitutes for the same good or service, but are bundled by a common intermediary. Focusing on hospital mergers across distinct geographic markets, we show that such combinations can reduce competition among merging hospitals for inclusion in insurers' networks, leading to higher prices (or lower-quality care). Using data on hospital mergers from 1996-2012, we find support that this mechanism operates within state boundaries: cross-market, within-state hospital mergers yield price increases of 7-9 percent for acquiring hospitals, whereas out of state acquisitions do not yield significant increases.

Suggested Citation

Dafny, Leemore S. and Ho, Kate and Ho, Kate and Lee, Robin S., The Price Effects of Cross-Market Hospital Mergers (March 2016). NBER Working Paper No. w22106, Available at SSRN: https://ssrn.com/abstract=2752311

Leemore S. Dafny (Contact Author)

Northwestern University - Department of Management & Strategy ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kate Ho

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Robin S. Lee

Harvard University - Department of Economics ( email )

1805 Cambridge St.
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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