The effects of market concentration and horizontal mergers on hospital costs and prices

Robert A. Connor, Roger D. Feldman, Bryan E. Dowd

Research output: Contribution to journalArticlepeer-review

87 Scopus citations

Abstract

Antitrust advocates believe that horizontal consolidation in hospital markets can reduce competition and increase prices while merger advocates believe it can benefit consumers by reducing service duplication. This study analyzed the market conditions, operating characteristics, and costs and prices of approximately 3500 short-term general hospitals (including 112 within-market-area mergers) from 1986 to 1994 to investigate the effects of market concentration, hospital mergers, and managed care penetration. The results show: a shift away from non-price competition toward price competition in health care markets; that this shift was fueled by increased market penetration by price-sensitive buyers; that horizontal hospital mergers produced average cost savings of approximately 5%, which were generally passed on to consumers as lower prices; that cost savings were generally greater for mergers of similar-size hospitals, with a higher degree of duplicative services, and with lower pre-merger occupancy rates; and some evidence that post-merger price reductions were smaller in less-competitive markets.

Original languageEnglish (US)
Pages (from-to)159-180
Number of pages22
JournalInternational Journal of Phytoremediation
Volume21
Issue number1
DOIs
StatePublished - Jan 1 1998

Keywords

  • Antitrust
  • Competition
  • Economies of scale
  • Hospital mergers
  • Market concentration

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