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The importance of technology in the consolidation of hospital markets. The case of the United States

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  • Mas, Nuria

    ()
    (IESE Business School)

  • Valentini, Giovanni

    (Bocconi University)

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    Abstract

    Over the last years, technology has become a key element of competition in the hospital market. At the same time, this market in the US has experienced an enormous merger activity. In this study, we analyze the role that technology can play in this consolidation wave by focusing on how it can affect a hospital´s selection of a particular target. We analyze the selection of targets in mergers that took place in the US hospital market between 1985 and 2000. Our results show that technology is an important element for the competition in the hospital market and, as such, it plays a relevant role also in M&A strategies. We find that hospitals are more likely to choose targets that complement their technological holding, specifically when these are complex technologies and with favorable cost/benefits ratios. With this, the merged entity tends to become closer to a one-stop-shop hospital.

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    Bibliographic Info

    Paper provided by IESE Business School in its series IESE Research Papers with number D/953.

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    Length: 30 pages
    Date of creation: 07 Mar 2012
    Date of revision:
    Handle: RePEc:ebg:iesewp:d-0953

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    Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
    Web page: http://www.iese.edu/
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    Related research

    Keywords: hospital; technology; merger; acquisition; complexity;

    This paper has been announced in the following NEP Reports:

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    1. Dranove, David & Lindrooth, Richard, 2003. "Hospital consolidation and costs: another look at the evidence," Journal of Health Economics, Elsevier, vol. 22(6), pages 983-997, November.
    2. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
    3. Bronwyn H. Hall, 1987. "The Effect of Takeover Activity on Corporate Research and Development," NBER Working Papers 2191, National Bureau of Economic Research, Inc.
    4. Michael L. Katz & Howard A. Shelanski, 2004. "Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?," NBER Working Papers 10710, National Bureau of Economic Research, Inc.
    5. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
    6. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
    7. Martin Gaynor & Robert J. Town, 2011. "Competition in Health Care Markets," NBER Working Papers 17208, National Bureau of Economic Research, Inc.
    8. Teresa D. Harrison, 2007. "Consolidations and closures: an empirical analysis of exits from the hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 16(5), pages 457-474.
    9. Mas, Núria & Seinfeld, Janice, 2008. "Is managed care restraining the adoption of technology by hospitals?," Journal of Health Economics, Elsevier, vol. 27(4), pages 1026-1045, July.
    10. Tay, Abigail, 2003. " Assessing Competition in Hospital Care Markets: The Importance of Accounting for Quality Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 786-814, Winter.
    11. Huckman, Robert S., 2006. "Hospital integration and vertical consolidation: An analysis of acquisitions in New York State," Journal of Health Economics, Elsevier, vol. 25(1), pages 58-80, January.
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