December 3, 2008
The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction
Posted by D. Daniel Sokol
Steven Tenn of the FTC's Bureau of Economics has written a merger retrospective working paper on The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction.
ABSTRACT: We conduct a retrospective study of the Sutter-Summit hospital merger to assess whether antitrust enforcement in this matter was appropriate. This consummated merger combined two hospitals located close together in the Oakland-Berkeley region of the San Francisco Bay Area. The greater metropolitan area contained many other hospitals that offered a similar range of services, but which were located farther away. A central issue raised by the Sutter-Summit transaction was whether travel costs were low enough such that these hospitals were a sufficient constraint on the merging parties to prevent an anticompetitive price increase. We use detailed claims data from three large health insurers to compare the post-merger price change for the merging parties to the price change for a set of control group hospitals. Our results show that Summit’s price increase was among the largest of any comparable hospital in California, indicating this transaction may have been anticompetitive.
December 3, 2008 | Permalink
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