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Do hospital mergers reduce costs?

Listed author(s):
  • Schmitt, Matt
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    Proponents of hospital consolidation claim that mergers lead to significant cost savings, but there is little systematic evidence backing these claims. For a large sample of hospital mergers between 2000 and 2010, I estimate difference-in-differences models that compare cost trends at acquired hospitals to cost trends at hospitals whose ownership did not change. I find evidence of economically and statistically significant cost reductions at acquired hospitals. On average, acquired hospitals realize cost savings between 4 and 7 percent in the years following the acquisition. These results are robust to a variety of different control strategies, and do not appear to be easily explained by post-merger changes in service and/or patient mix. I then explore several extensions of the results to examine (a) whether the acquiring hospital/system realizes cost savings post-merger and (b) if cost savings depend on the size of the acquirer and/or the geographic overlap of the merging hospitals.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0167629617300930
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    Article provided by Elsevier in its journal Journal of Health Economics.

    Volume (Year): 52 (2017)
    Issue (Month): C ()
    Pages: 74-94

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    Handle: RePEc:eee:jhecon:v:52:y:2017:i:c:p:74-94
    DOI: 10.1016/j.jhealeco.2017.01.007
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505560

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