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The importance of technology in the consolidation of hospital markets. The case of the United States

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Listed author(s):
  • Mas, Nuria

    ()

    (IESE Business School)

  • Valentini, Giovanni

    (Bocconi University)

Registered author(s):

    Abstract

    Over the last years, technology has become a key element of competition in the hospital market. At the same time, this market in the US has experienced an enormous merger activity. In this study, we analyze the role that technology can play in this consolidation wave by focusing on how it can affect a hospital´s selection of a particular target. We analyze the selection of targets in mergers that took place in the US hospital market between 1985 and 2000. Our results show that technology is an important element for the competition in the hospital market and, as such, it plays a relevant role also in M&A strategies. We find that hospitals are more likely to choose targets that complement their technological holding, specifically when these are complex technologies and with favorable cost/benefits ratios. With this, the merged entity tends to become closer to a one-stop-shop hospital.

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    File URL: http://www.iese.edu/research/pdfs/DI-0953-E.pdf
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    Paper provided by IESE Business School in its series IESE Research Papers with number D/953.

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    Length: 30 pages
    Date of creation: 07 Mar 2012
    Handle: RePEc:ebg:iesewp:d-0953
    Contact details of provider: Postal:
    IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN

    Web page: http://www.iese.edu/

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    Keywords: hospital; technology; merger; acquisition; complexity;

    This paper has been announced in the following NEP Reports:

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    1. Michael L. Katz & Howard A. Shelanski, 2005. "Merger Policy and Innovation: Must Enforcement Change to Account for Technological Change?," NBER Chapters,in: Innovation Policy and the Economy, Volume 5, pages 109-165 National Bureau of Economic Research, Inc.
    2. Gaynor, Martin & Vogt, William B., 2000. "Antitrust and competition in health care markets," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 27, pages 1405-1487 Elsevier.
    3. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    4. Mas, Núria & Seinfeld, Janice, 2008. "Is managed care restraining the adoption of technology by hospitals?," Journal of Health Economics, Elsevier, vol. 27(4), pages 1026-1045, July.
    5. Bronwyn H. Hall, 1988. "The Effect of Takeover Activity on Corporate Research and Development," NBER Chapters,in: Corporate Takeovers: Causes and Consequences, pages 69-100 National Bureau of Economic Research, Inc.
    6. Teresa D. Harrison, 2007. "Consolidations and closures: an empirical analysis of exits from the hospital industry," Health Economics, John Wiley & Sons, Ltd., vol. 16(5), pages 457-474.
    7. Huckman, Robert S., 2006. "Hospital integration and vertical consolidation: An analysis of acquisitions in New York State," Journal of Health Economics, Elsevier, vol. 25(1), pages 58-80, January.
    8. Baker, Laurence C., 1997. "The effect of HMOs on fee-for-service health care expenditures: Evidence from Medicare," Journal of Health Economics, Elsevier, vol. 16(4), pages 453-481, August.
    9. Robert S. Huckman & Gary P. Pisano, 2006. "The Firm Specificity of Individual Performance: Evidence from Cardiac Surgery," Management Science, INFORMS, vol. 52(4), pages 473-488, April.
    10. Dranove, David & Lindrooth, Richard, 2003. "Hospital consolidation and costs: another look at the evidence," Journal of Health Economics, Elsevier, vol. 22(6), pages 983-997, November.
    11. Tay, Abigail, 2003. " Assessing Competition in Hospital Care Markets: The Importance of Accounting for Quality Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 786-814, Winter.
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