Hospital Consolidation and Negotiated PPO Prices

During the past decade, hospitals have consolidated at an unprecedented rate. Fearing a rise in market power, U.S. antitrust agencies have attempted to block several consolidations, with little success. In ongoing hearings, these agencies are reexamining the potential anticompetitive impact of consolidation. This paper presents new evidence about the effects of consolidation on hospital prices. We examine the actual prices paid to hospitals in four market areas across the United States, with mixed results. The majority of merging hospitals raised prices by more than their peers, but many did not. Moreover, we find a statistically significant association between price increases and consolidation in only two markets. Our results suggest that some, but not all mergers of competing hospitals may facilitate price increases.