Mergers and Marginal Costs: New Evidence on Hospital Buyer Power

75 Pages Posted: 26 Aug 2018 Last revised: 23 Dec 2020

See all articles by Stuart Craig

Stuart Craig

University of Pennsylvania - The Wharton School

Matthew Grennan

National Bureau of Economic Research (NBER); University of California, Berkeley - Haas School of Business

Ashley Swanson

Columbia University - Columbia Business School; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: May 15, 2020

Abstract

We estimate the effects of hospital mergers, using detailed data containing medical supply transactions (representing 23 percent of operating costs) from a sample of US hospitals 2009-2015. Pre-merger price variation across hospitals (Gini coefficient 7 percent) suggests significant opportunities for cost decreases. However, we observe limited evidence of actual savings. In this retrospective sample, targets realized 1.9 percent savings; acquirers realize no significant savings. Examining treatment effect heterogeneity to shed light on theories of “buyer power,” we find that savings, when they occur, tend to be local, and potential benefits of savings may be offset by managerial costs of merging.

Keywords: Merger, Hospital, Buyer Power, Medical Device

Suggested Citation

Craig, Stuart and Grennan, Matthew and Grennan, Matthew and Swanson, Ashley, Mergers and Marginal Costs: New Evidence on Hospital Buyer Power (May 15, 2020). Available at SSRN: https://ssrn.com/abstract=3232902 or http://dx.doi.org/10.2139/ssrn.3232902

Stuart Craig

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Matthew Grennan (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

Ashley Swanson

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
331
Abstract Views
2,244
rank
105,265
PlumX Metrics