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Hospital Consolidation: Trends, Impacts & Outlook
Published on: January 01, 2020. Updated on: November 03, 2020.
Data from Kaufman, Hall & Associates, LLC: “2017 in Review: The Year M&A Shook the Healthcare Landscape.” and “2018 M&A in Review: A New Healthcare Landscape Takes Shape.” The figures reflect all publicly disclosed acquisitions, mergers, joint ventures and joint operating agreements involving acute care hospitals or hospital systems. Not all announced deals were ultimately finalized.
Data from Kaufman, Hall & Associates, LLC. “2018 M&A in Review: A New Healthcare Landscape Takes Shape.”
a Summary points are drawn from numerous articles reporting individual studies as well as from research syntheses, including the following:
- Capps C and Dranove D. “Hospital Consolidation and Negotiated PPO Prices.” Health Affairs, 23(1):175-81, March/April 2004.
- Cooper Z, Craig SV, Gaynor M and Van Reenen J. “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured.” Quarterly Journal of Economics, 134(1):51-107, February 2019.
- Dafny L. “Estimation and Identification of Merger Effects: An Application to Hospital Mergers.” The Journal of Law and Economics, 52(3):523-50, August 2009.
- Gaynor M, Ho K, and Town RJ. “The Industrial Organization of Health Care Markets.” Journal of Economic Literature, 53(2):235-85, June 2015.
- Gaynor M and Town R. “Competition in Health Care Markets.” In Pauly MV, McGuire TG, and Barros PP, editors, Handbook of Health Economics, Volume 2, Chapter 9 (2011).
- Gaynor M and Town R. “The Impact of Hospital Consolidation – Update.” Robert Wood Johnson Foundation, Update to Research Synthesis Report No. 9, June 2012.
- Gaynor M and Vogt WB. “Competition Among Hospitals.” The RAND Journal of Economics, 34(4):764-85, Winter 2003.
- Gowrisankaran G, Nevo A, and Town R. “Mergers When Prices Are Negotiated: Evidence from the Hospital Industry.” American Economic Review, 105(1):172-203, January 2015.
- Haas-Wilson D and Garmon C. “Hospital Mergers and Competitive Effects: Two Retrospective Analyses.” International Journal of the Economics of Business, 18(1):17-32, February 2011.
- Tenn S. ”The Price-Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction.” International Journal of the Economics of Business, 18(1):65-82, February 2011.
- Thompson A. “The Effect of Hospital Mergers on Inpatient Prices: A Case Study of the New Hanover-Cape Fear Transaction." International Journal of the Economics of Business, 18(1):91-101, February 2011.
- Vita MG and Sacher S. “The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study.” Journal of Industrial Economics, 49(1):63-84, March 2001.
- Vogt WB and Town R. “How Has Hospital Consolidation Affected the Price and Quality of Hospital Care?” Robert Wood Johnson Foundation, Research Synthesis Report No. 9, February 2006.
b Dafny L, Ho K and Lee RS. “The Price Effects of Cross-Market Mergers: Theory and Evidence from the Hospital Industry.” The RAND Journal of Economics, forthcoming.
c Lewis MS and Pflum KE. “Hospital Systems and Bargaining Power: Evidence from Out-of-Market Acquisitions.” The RAND Journal of Economics, 48(3):579-610, Fall 2017.
d Schmitt M. “Multimarket Contact in the Hospital Industry.” American Economic Journal: Economic Policy, 10(3):361-87, August 2018.
a Summary points drawn from numerous articles reporting individual studies as well as from research syntheses, including the following:
- Beaulieu ND, Dafny LS, Landon BE, Dalton JB, Kuye I, and McWilliams JM. “Changes in Quality of Care after Hospital Mergers and Acquisitions.” The New England Journal of Medicine, 328(1):51-9. January 2, 2020.
- Capps C. “The Quality Effects of Hospital Mergers,” Department of Justice, Economic Analysis Group Discussion Paper 05–6. 2005.
- Cooper Z, Gibbons S, Jones S and McGuire A. “Does Hospital Competition Save Lives? Evidence from the English NHS Patient Choice Reforms.” Economic Journal, 121(554):F228-60, August 2011.
- Gaynor M, Ho K, and Town R. “The Industrial Organization of Health Care Markets.” Journal of Economic Literature, 53(2):235-85, June 2015.
- Gaynor M, Moreno-Serra R, and Propper C. “Death by Market Power: Reform, Competition and Patient Outcomes in the British National Health Service.” American Economic Journal: Economic Policy, 5(4)134-66, November 2013.
- Gaynor M and Town R. “The Impact of Hospital Consolidation – Update.” Robert Wood Johnson Foundation, Update to Research Synthesis Report No. 9, June 2012.
- Ho V and Hamilton BH. “Hospital Mergers and Acquisitions: Does Market Consolidation Harm Patients?" Journal of Health Economics, 19(5):767-91, September 2000.
- Kessler DP and McClellan MB. “Is Hospital Competition Socially Wasteful?” The Quarterly Journal of Economics, 115(2):577-625, May 2000.
- Kessler DP and Geppert JJ. “The Effects of Competition on Variation in the Quality and Cost of Medical Care.” Journal of Economics and Management Strategy, 14(3):575-89, July 2005.
- Noether M and May S. “Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis.” Charles River Associates, January 2017.
- Romano PS and Balan DJ. “A Retrospective Analysis of the Clinical Quality Effects of the Acquisition of Highland Park Hospital by Evanston Northwestern Healthcare.” International Journal of the Economics of Business, 18(1):45–64. February 2011.
- Short MN and Ho V. “Weighing the Effects of Vertical Integration Versus Market Concentration on Hospital Quality.” Medical Care Research and Review, published online February 9, 2019.
- Vogt WB and Town R. “How Has Hospital Consolidation Affected the Price and Quality of Hospital Care?” Robert Wood Johnson Foundation, Research Synthesis Report No. 9, February 2006.
b Burns LR, McCullough J, Wholey D, et al. “Is the System Really the Solution? Operating Costs in Hospital Systems,” Medical Care Research and Review 72(3):247-72, June 2015.
c Schmitt M. “Do Hospital Mergers Reduce Costs?” Journal of Health Economics, 52:74-94, March 2017.
d Noether M and May S. “Hospital Merger Benefits: Views from Hospital Leaders and Econometric Analysis.” Charles River Associates, January 2017.
e Knapp C, Peterson J, Gundling R, Mulvany C, and Gerhardt W. “Hospital M&A: When Done Well, M&A Can Achieve Valuable Outcomes.” Report from Deloitte and the Health Care Financial Management Association, 2017.
f Noether M and May S. “Hospital Merger Benefits, A Review and Extension.” Charles River Associates, December 2018.
g Craig S, Grennan M and Swanson A. "Mergers and Marginal Costs: New Evidence on Hospital Buyer Power." March 27, 2019.
h Dranove D and Lindrooth R. “Hospital Consolidation and Costs: Another Look at the Evidence.” Journal of Health Economics, 22(6):983-97, November 2003.
i Vogt WB and Town R. “How Has Hospital Consolidation Affected the Price and Quality of Hospital Care?” Robert Wood Johnson Foundation, Research Synthesis Report No. 9, February 2006.
Number of announced consolidations is from Kaufman, Hall & Associates, LLC: “2017 in Review: The Year M&A Shook the Healthcare Landscape” and “2018 M&A in Review: A New Healthcare Landscape Takes Shape.”
FTC case history is from https://www.ftc.gov/enforcemen... 15
a Seminal studies of cross-market regional mergers include:
- Vistnes G and Sarafidis Y. “Cross-Market Hospital Mergers: A Holistic Approach.” Antitrust Law Journal, 79(1):253-91, 2013.
- Dafny L, Ho K and Lee RS. “The Price Effects of Cross-Market Mergers: Theory and Evidence from the Hospital Industry.” The RAND Journal of Economics, forthcoming.
a A framework for studying multimarket contact was developed and tested in Schmitt M. “Multimarket Contact in the Hospital Industry.” American Economic Journal: Economic Policy, 10(3):361-87, August 2018.
Recent analyses of COPAs include:
- Bovbjerg R and Berenson RA. “Certificates of Public Advantage: Can They Address Provider Market Power?” Urban Institute Research Report. February 2015.
- Fuse Brown EC. ”Hospital Mergers and Public Accountability: Tennessee and Virginia Employ a Certificate of Public Advantage.” Milbank Memorial Fund Report, September 2018.
- Fuse Brown EC. “To Oversee or Not to Oversee? Lessons from the Repeal of North Carolina’s Certificate of Public Advantage Law.” Millbank Memorial Fund Issue Brief, January 2019.
- Federal Trade Commission. “FTC Staff Notice of COPA Assessment: Request for Empirical Research and Public Comments.” November 1, 2017.
a The policy recommendations presented here have been promoted to varying degrees in the following recent reports and publications:
- American Enterprise Institute and the Brookings Institution. “Cost-Reducing Health Policies: A Response to Chairman Alexander and the Senate Committee on Health, Education, Labor and Pensions.” March 1, 2019.
- Azar AM, Mnuchin ST and Acosta A. “Reforming America’s Healthcare System Through Choice and Competition.” December 3, 2018.
- Chopra R. “Comment of Commissioner Rohit Chopra on Hearing #1 on Competition and Consumer Protection in the 21st Century.” September 6, 2018.
- Fuse Brown EC. “State Strategies to Address Rising Prices Caused by Health Care Consolidations.” National Academy for State Health Policy. September 2017.
- Gaynor M, Mostashari F and Ginsburg PB. “Making Health Care Markets Work: Competition Policy for Health Care.” April 2017.
- Gaynor M. “Diagnosing the Problem: Exploring the Effects of Consolidation and Anticompetitive Conduct in Health Care Markets.” Statement before the Committee on the Judiciary, Subcommittee on Antitrust, Commercial and Administrative Law, U.S. House of Representatives, March 7, 2019.
- Gee E and Gurwitz E. “Provider Consolidation Drives Up Health Care Costs: Policy Recommendations to Curb Abuses of Market Power and Protect Patients.” Center for American Progress, December 2018.
- Glied SA and Altman SH. “Beyond Antitrust: Health Care and Insurance Market Trends and the Future of Competition.” Health Affairs, 36(9):1572-7. September 2017.
- Greaney TL. “Coping with Concentration.” Health Affairs, 36(9):1564-71. September 2017.
- National Academy of Social Insurance. “Addressing Pricing Power in Health Care Markets: Principles and Policy Options to Strengthen and Shape Markets. The Final Report of the Academy’s Panel on Pricing Power in Health Care Markets." April 2015.
- Roy A. "Improving Hospital Competition: A Key to Affordable Health Care." FREOPP brief. January 16, 2019.
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