Certificates of Public Advantage and Hospital Mergers: Evidence from Maine, Montana and South Carolina

83 Pages Posted: 16 Jul 2020

See all articles by Christopher Garmon

Christopher Garmon

Bloch School of Management

Kishan Bhatt

Princeton University - Princeton School of Public and International Affairs

Date Written: June 24, 2020

Abstract

Certificates of Public Advantage (COPAs) grant antitrust immunity to merging hospitals conditional on active state regulation. We investigate the effects of three mergers shielded with COPAs: Benefis in Great Falls, Montana, Palmetto in Columbia, South Carolina, and MaineHealth’s acquisition of Southern Maine Medical Center (SMMC). We find that Benefis’s and SMMC’s prices during the COPA period closely tracked controls, but the removal of each COPA led to a price increase. Most of SMMC’s quality measures also declined significantly after its COPA expired. Palmetto’s price closely tracked the average price of control hospitals in the initial COPA period and after the state renegotiated the COPA. The results illustrate that the removal of COPA regulation can lead to higher prices and reduced quality from unconstrained provider market power.

Keywords: COPA, hospital mergers, antitrust, regulation

JEL Classification: L43, I11

Suggested Citation

Garmon, Christopher and Bhatt, Kishan, Certificates of Public Advantage and Hospital Mergers: Evidence from Maine, Montana and South Carolina (June 24, 2020). Available at SSRN: https://ssrn.com/abstract=3634577 or http://dx.doi.org/10.2139/ssrn.3634577

Christopher Garmon (Contact Author)

Bloch School of Management ( email )

United States
816-235-2689 (Phone)

Kishan Bhatt

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

Princeton University
Princeton, NJ 08544-1021
United States

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