Antitrust Issues in Defining the Product Market for Hospital Services

Abstract

In this paper we examine the standard product market relied on by the courts and antitrust agencies in hospital mergers-acute care, inpatient services-and consider whether narrower or broader alternatives may be more appropriate to assess the competitive effects of a hospital merger. To examine how much disaggregation of the standard product market definition may matter for the definition of relevant geographic markets and concentration, we considered patient flows and concentration for the overall inpatient 'cluster' and more disaggregated categories of service for two regions of California: San Luis Obispo and Sacramento. We find that a disaggregated approach may involve a relatively small number of inpatient service categories, that the overall cluster masked some variability in the underlying patient flows by service category, and that in San Luis Obispo, the overall cluster masked considerable detail in concentration at the service category level, which appeared to have been much less true in Sacramento.