Non-profit hospital mergers: the effect on healthcare costs and utilization.

Abstract

I use a 2010 non-profit hospital merger in Ohio to study the effect of market concentration on market outcomes. Using the Synthetic Control Method and Truven MarketScan data, I document three findings. First, courts are lenient to non-profit mergers, and I cast doubt on this practice by showing that the studied merger led to a 123% increase in the payments for inpatient childbirth services. Second, I provide the first empirical evidence for the conjecture that mergers increase out-of-pocket payments and reduce the utilization of care. Last, I show that the effect of market power on market outcomes is asymmetric: the increase in payments and welfare loss created by a merger persist after the merger is rescinded. Thus, even successful FTC challenges may not revert the effect of harmful mergers, and it is essential to deny such mergers before they proceed.