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Patient Admission Patterns and Acquisitions of "Feeder" Hospitals

Author

Listed:
  • Sayaka Nakamura

    (Baker Institute for Public Policy, Rice University)

  • Cory Capps

    (Economic Analysis Group, Antitrust Division, Department of Justice)

  • David Dranove

    (Kellogg School of Management, Northwestern University)

Abstract

Large, urban tertiary care hospitals often acquire outlying community hospitals. One possible motivation is to increase referrals. Sophisticated acquirers may even attempt to concentrate additional referrals among more profitable patients. We explore these issues by studying 26 vertical acquisitions in Florida and New York that occurred in the late 1990s, a peak period for such transactions. We compare changes in referrals of patients from target market areas to changes in a matched set of control markets. We find that roughly 30 percent of the vertical acquisitions resulted in a significant increase in referrals to the acquirer. Very few acquisitions were followed by decreases in referrals. When acquisitions did lead to increased referrals, the effect was usually largest for patients with more remunerative insurance and patients undergoing more profitable procedures. However, we find no evidence that hospitals selectively avoided referrals of patients with severe conditions for which costs might exceed reimbursements.

Suggested Citation

  • Sayaka Nakamura & Cory Capps & David Dranove, 2007. "Patient Admission Patterns and Acquisitions of "Feeder" Hospitals," EAG Discussions Papers 200701, Department of Justice, Antitrust Division.
    • Handle: RePEc:doj:eagpap:200701
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    File URL: https://www.justice.gov/atr/public/eag/221240.pdf
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    Cited by:

    1. Christopher Afendulis & Daniel Kessler, 2011. "Vertical Integration and Optimal Reimbursement Policy," NBER Working Papers 17316, National Bureau of Economic Research, Inc.
    2. Richards, Michael R. & Seward, Jonathan A. & Whaley, Christopher M., 2022. "Treatment consolidation after vertical integration: Evidence from outpatient procedure markets," Journal of Health Economics, Elsevier, vol. 81(C).
    3. Andrew Sfekas, 2019. "Quality Competition and Intra-System Substitution in the Hospital Industry," American Journal of Health Economics, MIT Press, vol. 5(1), pages 65-96, Winter.
    4. Jeremy A. Verlinda, 2007. "Price-Response Asymmetry and Spatial Differentiation in Local Retail Gasoline Markets," EAG Discussions Papers 200704, Department of Justice, Antitrust Division.
    5. Christopher Afendulis & Daniel Kessler, 2011. "Vertical integration and optimal reimbursement policy," International Journal of Health Economics and Management, Springer, vol. 11(3), pages 165-179, September.
    6. Swanson, Ashley, 2021. "Physician investment in hospitals: Specialization, selection, and quality in cardiac care," Journal of Health Economics, Elsevier, vol. 80(C).

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