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The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study

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  • Vita, Michael G
  • Sacher, Seth

Abstract

Applying conventional horizontal merger enforcement rules to nonprofit hospitals is controversial. Critics contend that the different objective function of not-for-profits entities should mitigate competitive concerns about mergers involving nonprofit hospitals. We analyze a merger that reduced the number of competitors (both nonprofit) in the alleged relevant market from three to two. We find that the transaction was followed by significant price increases; we reject the hypothesis that these price increases reflect higher post-merger quality. This study should help policymakers assess the validity of current merger enforcement rules, especially as they apply to not-for-profit enterprises. Copyright 2001 by Blackwell Publishing Ltd

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  • Vita, Michael G & Sacher, Seth, 2001. "The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 63-84, March.
  • Handle: RePEc:bla:jindec:v:49:y:2001:i:1:p:63-84
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    Cited by:

    1. Brito, Duarte & Pereira, Pedro & Ramalho, Joaquim J.S., 2013. "Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry," International Journal of Industrial Organization, Elsevier, vol. 31(5), pages 554-568.
    2. Gaynor, Martin & Vogt, William B, 2003. " Competition among Hospitals," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 764-785, Winter.
    3. Dodonova, Anna, 2013. "Preemptive bidding in takeover auctions with externality," Journal of Economics and Business, Elsevier, vol. 69(C), pages 35-44.
    4. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    5. Orley Ashenfelter & Daniel Hosken, 2010. "The Effect of Mergers on Consumer Prices: Evidence from Five Mergers on the Enforcement Margin," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 417-466.
    6. Paul Pautler, 2015. "A Brief History of the FTC’s Bureau of Economics: Reports, Mergers, and Information Regulation," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 46(1), pages 59-94, February.
    7. Matthew Weinberg, 2007. "The Price Effects of Horizontal Mergers: A Survey," Working Papers 62, Princeton University, Department of Economics, Center for Economic Policy Studies..
    8. John Simpson, 2003. "Geographic markets in hospital mergers: a case study," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 10(3), pages 291-303.
    9. Orley Ashenfelter & Daniel Hosken, 2008. "The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies," Working Papers 1037, Princeton University, Department of Economics, Center for Economic Policy Studies..
    10. repec:pri:cepsud:160ashenfelter is not listed on IDEAS
    11. Tenn, Steven & Yun, John M., 2011. "The success of divestitures in merger enforcement: Evidence from the J&J-Pfizer transaction," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 273-282, March.
    12. Katalin Katona & Marcel Canoy, 2013. "Welfare standards in hospital mergers," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(4), pages 573-586, August.
    13. Cory Capps & Dennis W. Carlton & Guy David, 2017. "Antitrust Treatment of Nonprofits: Should Hospitals Receive Special Care?," NBER Working Papers 23131, National Bureau of Economic Research, Inc.
    14. repec:pal:jorsoc:v:55:y:2004:i:10:d:10.1057_palgrave.jors.2601738 is not listed on IDEAS
    15. Orley Ashenfelter & Daniel Hosken & Matthew Weinberg, 2014. "Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers," Journal of Law and Economics, University of Chicago Press, vol. 57(S3), pages 67-100.
    16. Marco A. MARINI & Paolo POLIDORI & Desiree TEOBALDELLI & Alberto ZEVI, 2015. "Welfare Enhancing Coordination In Consumer Cooperatives Under Mixed Oligopoly," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 86(3), pages 505-527, September.
    17. Packalen, Mikko & Sen, Anindya, 2013. "Static and dynamic merger effects: A market share based empirical analysis," International Review of Law and Economics, Elsevier, vol. 36(C), pages 12-24.
    18. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    19. Helda Azevedo & Céu Mateus, 2014. "Cost effects of hospital mergers in Portugal," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(9), pages 999-1010, December.
    20. Ly, Pierre & Mason, Geri, 2012. "Competition Between Microfinance NGOs: Evidence from Kiva," World Development, Elsevier, vol. 40(3), pages 643-655.
    21. Samuel Kleiner & William White & Sean Lyons, 2015. "Market power and provider consolidation in physician markets," International Journal of Health Economics and Management, Springer, vol. 15(1), pages 99-126, March.

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