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Hospital Integration and Vertical Consolidation: An Analysis of Acquisitions in New York State

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  • Robert S. Huckman

Abstract

While prior studies tend to view hospital integration through the lens of horizontal consolidation, I provide an analysis of its vertical aspects. I examine the effect of hospital acquisitions in New York State on the distribution of market share for major cardiac procedures across providers in target markets. I find evidence of benefits to acquirers via business stealing, with the resulting redistribution of volume across providers having small effects, if any, on total welfare with respect to cardiac care. The results of this analysis--along with similar assessments for other services--can be incorporated into future studies of hospital consolidation.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11379.

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Date of creation: May 2005
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Publication status: published as Huckman, Robert S. "Hospital Integration And Vertical Consolidation: An Analysis Of Acquisitions In New York State," Journal of Health Economics, 2006, v25(1,Jan), 58-80.
Handle: RePEc:nbr:nberwo:11379

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  1. Ho, Vivian & Hamilton, Barton H., 2000. "Hospital mergers and acquisitions: does market consolidation harm patients?," Journal of Health Economics, Elsevier, Elsevier, vol. 19(5), pages 767-791, September.
  2. David M. Cutler & Elizabeth Richardson, 1999. "Your Money and Your Life: The Value of Health and What Affects It," NBER Chapters, National Bureau of Economic Research, Inc, in: Frontiers in Health Policy Research, volume 2, pages 99-132 National Bureau of Economic Research, Inc.
  3. Noether, Monica, 1988. "Competition among hospitals," Journal of Health Economics, Elsevier, Elsevier, vol. 7(3), pages 259-284, September.
  4. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  5. McClellan, Mark & Cutler, David & Newhous, Joseph P., 2000. "How Does Managed Care Do It?," Scholarly Articles 2643884, Harvard University Department of Economics.
  6. Laurence C. Baker & Martin L. Brown, 1999. "Managed Care, Consolidation Among Health Care Providers, and Health Care: Evidence from Mammography," RAND Journal of Economics, The RAND Corporation, vol. 30(2), pages 351-374, Summer.
  7. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, Elsevier, vol. 11(3), pages 217-233, October.
  8. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, Elsevier, vol. 18(1), pages 87-98, January.
  9. Cutler, David M. & Huckman, Robert S., 2003. "Technological development and medical productivity: the diffusion of angioplasty in New York state," Journal of Health Economics, Elsevier, Elsevier, vol. 22(2), pages 187-217, March.
  10. David M. Cutler & Jill R. Horwitz, 1998. "Converting Hospitals from Not-for-profit to For-profit Status," NBER Working Papers 6672, National Bureau of Economic Research, Inc.
  11. David Dranove & Daniel Kessler & Mark McClellan & Mark Satterthwaite, 2003. "Is More Information Better? The Effects of "Report Cards" on Health Care Providers," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 111(3), pages 555-588, June.
  12. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, Elsevier, vol. 18(1), pages 69-86, January.
  13. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(2), pages 577-615, May.
  14. Martin Gaynor & Deborah Haas-Wilson, 1999. "Change, Consolidation, and Competition in Health Care Markets," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 13(1), pages 141-164, Winter.
  15. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 249-275, February.
  16. Jason R. Barro & David Cutler, 1997. "Consolidation in the Medical Care Marketplace: A Case Study from Masschusetts," NBER Working Papers 5957, National Bureau of Economic Research, Inc.
  17. David M. Cutler & Robert S. Huckman & Mary Beth Landrum, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," NBER Working Papers 10489, National Bureau of Economic Research, Inc.
  18. David M. Cutler & Mark McClellan & Joseph P. Newhouse, 2000. "How Does Managed Care Do It?," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 526-548, Autumn.
  19. McClellan, Mark & Newhouse, Joseph P., 1997. "The marginal cost-effectiveness of medical technology: A panel instrumental-variables approach," Journal of Econometrics, Elsevier, Elsevier, vol. 77(1), pages 39-64, March.
  20. Cutler, David & Landrum, Mary Beth & Huckman, Robert, 2004. "The Role of Information in Medical Markets: An Analysis of Publicly Reported Outcomes in Cardiac Surgery," Scholarly Articles 2640582, Harvard University Department of Economics.
  21. Lynk, William J., 1995. "The creation of economic efficiencies in hospital mergers," Journal of Health Economics, Elsevier, Elsevier, vol. 14(5), pages 507-530, December.
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Cited by:
  1. Kolstad, Jonathan T. & Cutler, David M. & Huckman, Robert Steven, 2010. "Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery," Scholarly Articles 5344226, Harvard University Department of Economics.
  2. David M. Cutler & Robert S. Huckman & Jonathan T. Kolstad, 2010. "Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 2(1), pages 51-76, February.
  3. Jonathan T. Kolstad, 2013. "Information and Quality When Motivation Is Intrinsic: Evidence from Surgeon Report Cards," American Economic Review, American Economic Association, American Economic Association, vol. 103(7), pages 2875-2910, December.
  4. Matthew Grennan, 2013. "Price Discrimination and Bargaining: Empirical Evidence from Medical Devices," American Economic Review, American Economic Association, American Economic Association, vol. 103(1), pages 145-77, February.
  5. Jonathan T. Kolstad, 2013. "Information and Quality when Motivation is Intrinsic: Evidence from Surgeon Report Cards," NBER Working Papers 18804, National Bureau of Economic Research, Inc.
  6. Mas, Nuria & Valentini, Giovanni, 2012. "The importance of technology in the consolidation of hospital markets. The case of the United States," IESE Research Papers, IESE Business School D/953, IESE Business School.
  7. Suhui Li & Avi Dor, 2013. "How Do Hospitals Respond to Market Entry? Evidence from A Deregulated Market for Cardiac Revascularization," NBER Working Papers 18926, National Bureau of Economic Research, Inc.

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