Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Wednesday, 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.

http://lawprofessors.typepad.com/antitrustprof_blog/2008/12/the-price-effec.html

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