Abstract
Analyses of hospital mergers typically focus on acquisitions that alter local market concentration. However, as prices are negotiated between hospital systems and insurers, this focus may overlook the impact of cross‐market interdependence in the bargaining outcome. Using data on out‐of‐market acquisitions occurring across the United States from 2000–2010, we investigate the impact of cross‐market dependencies on negotiated prices. We find that prices at hospitals acquired by out‐of‐market systems increase by about 17% more than unacquired, stand‐alone hospitals and confirm that out‐of‐market mergers result in a relaxation of competition, the prices of nearby competitors to acquired hospitals increase by around 8%.
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