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Nonprofit Hospital Mergers: What can we Learn from Financial Markets?

Author

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  • Kenneth Danger

Abstract

Antitrust challenges to hospital mergers have become increasingly common. Empirical studies of hospital prices and costs have generally utilized static measures of concentration and accounting data. This study avoids the difficulties that surround such approaches. Instead, this study seeks an answer to the question; what can we learn about nonprofit hospital mergers from capital market data? The results indicate that the effects of nonprofit hospital mergers are anti-competitive but also small. They cannot be distinguished from either zero or from the effects of profit-seeking mergers. However the results are precise enough to reject previous findings claiming that nonprofit hospital mergers lead to large price decreases.

Suggested Citation

  • Kenneth Danger, 1997. "Nonprofit Hospital Mergers: What can we Learn from Financial Markets?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(1), pages 63-69.
  • Handle: RePEc:taf:ijecbs:v:4:y:1997:i:1:p:63-69
    DOI: 10.1080/758532194
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    References listed on IDEAS

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    1. Thomas W. Gilligan, 1986. "The Competitive Effects of Resale Price Maintenance," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 544-556, Winter.
    2. Michael Woolley, J., 1991. "The competitive effects of horizontal mergers in the hospital industry: An even closer look," Journal of Health Economics, Elsevier, vol. 10(3), pages 373-378, October.
    3. French, Dan W., 1984. "The weekend effect on the distribution of stock prices : Implications for option pricing," Journal of Financial Economics, Elsevier, vol. 13(4), pages 547-559, December.
    4. Woolley, J. Michael, 1989. "The competitive effects of horizontal mergers in the hospital industry," Journal of Health Economics, Elsevier, vol. 8(3), pages 271-291, December.
    5. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-461, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Nonprofit hospital mergers; Imperfect competition; Profits; JEL classification: 111; L31; L44; L13;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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