Antitrust & Competition Policy Blog

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

Monday, November 5, 2018

Mergers and Marginal Costs: New Evidence on Hospital Buyer Power

Stuart Craig, Matthew R. Grennan, and Ashley Swanson study Mergers and Marginal Costs: New Evidence on Hospital Buyer Power.

ABSTRACT: We estimate the effects of horizontal mergers on marginal cost efficiencies – an ubiquitous merger justification – using data containing supply purchase orders from a large sample of US hospitals 2009-2015. The data provide a level of detail that has been difficult to observe previously, and a variety of product categories that allows us to examine economic mechanisms underlying “buyer power.” We find that merger target hospitals save on average $176 thousand (or 1.5 percent) annually, driven by geographically local efficiencies in price negotiations for high-tech “physician preference items.” We find only mixed evidence on savings by acquirers.

https://lawprofessors.typepad.com/antitrustprof_blog/2018/11/mergers-and-marginal-costs-new-evidence-on-hospital-buyer-power.html

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