The effect of non-rural hospital mergers and acquisitions: An examination of cost and price outcomes

This paper examines the direct impact of urban horizontal hospital consolidations on hospital efficiency and prices. Specifically, we measure the extent of cost savings resulting from these consolidations and the extent to which these gains are passed on to consumers. A fixed effects model is tested with data consisting of 4160 unique hospitals, 125 of which were involved in mergers and 1040 in system acquisitions, for over a 10-year time period. We find that hospital consolidation may generate efficiency in some circumstances and some of these gains may be passed on to consumers, but the results are very sensitive to hospital ownership and governance and the structure of the market following the consolidation.