Hospital Mergers and Competitive Effects: Two Retrospective Analyses

Abstract

We present empirical analyses of the effects of two hospital mergers – both occurring in the northern suburbs of Chicago in 2000 – on the pre‐ and post‐merger prices negotiated with commercial health insurers. Using difference‐in‐differences methodology and data on actual transaction prices, specifically the prices paid by private health insurance companies and patients for inpatient care, we find one of the mergers was anticompetitive. Relative to price increases at other hospitals, the merger between Evanston Northwestern and Highland Park Hospitals led to large and statistically significant post‐merger price increases. Our results are robust across data sources, control groups, and case‐mix adjustment methods.