SUMMARY

Objective: To examine the impact of “cross-market” hospital mergers on prices and quality and the extent to which serial acquisitions contribute to any measured effects.

Data Sources: 2009–2017 commercial claims from the Health Care Cost Institute (HCCI) and quality measures from Hospital Compare.

Study Design: Event study models in which the treated group consisted of hospitals that acquired hospitals further than 50 miles, and the control group was hospitals that were not part of any merger activity (as a target or acquirer) during the study period.

Data Extraction Methods: We extracted data for 214 treated hospitals and 955 control hospitals.

Principal Findings: Six years after acquisition, cross-market hospital mergers had increased acquirer prices by 12.9% (CI: 0.6%–26.6%) relative to control hospitals, but had no discernible impact on mortality and readmission rates for heart failure, heart attacks and pneumonia.

For serial acquirers, the price effect increased to 16.3% (CI: 4.8%–29.1%). For all acquisitions, the price effect was 21.8% (CI: 4.6%–41.7%) when the target’s market share was greater than the acquirer’s market share versus 9.7% (CI: −0.5% to 20.9%) when the opposite was true. The magnitude of the price effect was similar for out-of-state and in-state cross-market mergers.

Conclusions: Additional evidence on the price and quality effects of cross-market mergers is needed at a time when over half of recent hospital mergers have been cross-market. To date, no hospital mergers have been challenged by the Federal Trade Commission on cross-market grounds. Our study is the third to find a positive price effect associated with cross-market mergers and the first to show no quality effect and how serial acquisitions contribute to the price effect. More research is needed to identify the mechanism behind the price effects we observe and analyze price effect heterogeneity.