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How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare

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  • Thomas G. Wollmann

Abstract

US antitrust authorities are only notified of large mergers, so most transactions could escape antitrust scrutiny. I study premerger notification exemptions in the dialysis industry. I find that, in sharp contrast to reportable mergers, exempt ones almost completely avoid enforcement. As a result, exempt mergers increase concentration and reduce healthcare quality, as measured by hospitalization and mortality rates. I then estimate a structural model to simulate the equilibrium response of demand, quality, and enforcement to the elimination of exemptions. I find that the benefits of eliminating exemptions in the dialysis industry far exceed the costs.

Suggested Citation

  • Thomas G. Wollmann, 2020. "How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare," NBER Working Papers 27274, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27274
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    References listed on IDEAS

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    1. Jan Loecker & Jozef Konings & Patrick Cayseele, 2008. "Merger Review: How Much of Industry is Affected in an International Perspective?," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 1-19, March.
    2. Brent Neiman, 2014. "The Global Decline of the Labor Share," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(1), pages 61-103.
    3. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    4. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    5. Michael Elsby & Bart Hobijn & Ayseful Sahin, 2013. "The Decline of the U.S. Labor Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 1-63.
    6. Germán Gutiérrez & Thomas Philippon, 2017. "Investmentless Growth: An Empirical Investigation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(2 (Fall)), pages 89-190.
    7. Thomas G. Wollmann, 2019. "Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act," American Economic Review: Insights, American Economic Association, vol. 1(1), pages 77-94, June.
    8. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
    9. Joseph A. Clougherty & Jo Seldeslachts, 2013. "The Deterrence Effects of US Merger Policy Instruments," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1114-1144, October.
    10. Nikhil Agarwal & Itai Ashlagi & Michael A. Rees & Paulo J. Somaini & Daniel C. Waldinger, 2019. "Equilibrium Allocations under Alternative Waitlist Designs: Evidence from Deceased Donor Kidneys," NBER Working Papers 25607, National Bureau of Economic Research, Inc.
    11. Agarwal, Nikhil & Ashlagi, Itai & Rees, Michael & Somaini, Paulo & Waldinger, Daniel, 2019. "An Empirical Framework for Sequential Assignment: The Allocation of Deceased Donor Kidneys," Research Papers 3724, Stanford University, Graduate School of Business.
    12. Sam Peltzman, 2014. "Industrial Concentration under the Rule of Reason," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 101-120.
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    Cited by:

    1. Johannes Boehm & Jan Sonntag, 2023. "Vertical Integration and Foreclosure: Evidence from Production Network Data," Management Science, INFORMS, vol. 69(1), pages 141-161, January.
    2. repec:hal:spmain:info:hdl:2441/44gofgf80399mp5fq5q50vv5t6 is not listed on IDEAS
    3. Petek, Nathan, 2022. "The marginal benefit of hospitals: Evidence from the effect of entry and exit on utilization and mortality rates," Journal of Health Economics, Elsevier, vol. 86(C).
    4. repec:hal:wpspec:info:hdl:2441/44gofgf80399mp5fq5q50vv5t6 is not listed on IDEAS

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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