Saturday, October 22, 2016

How do you estimate the competitive effects of hospital mergers?

In the graph above, the two merging hospital systems are denoted by red and blue, while the non merging firms are denoted in yellow.  The circles are centered on zip codes and denote the number of patients who go to each hostpital system.  Using these data, the economists estimated a "gravity choice" model that showed

  • ... the merged hospitals are each other’s closest competitors. If Wellmont were to close, 75 percent of its patients would go to a Mountain States hospital. Similarly, if Mountain States were to close, 72 percent of its patients would go to a Wellmont facility.
These data are used to determine how much price would rise following the merger.  

Follow the Merger's progress through the regulatory process at the Johnson City Press.  UPDATE:  the parties realized that the report would have lead the FTC to challenge the merger (and likely win) so the parties asked the state legislatures of VA and TN to regulate the merger so they could reduce costs (by closing competing hospitals) without the risk to consumers of rising prices.  Presumably the state regulation would keep prices low in lieu of competition between the two systems.  

1 comment:

  1. Many hospital organizations are working towards providing better services to their customers. Some organizations are choosing not to use the word “merger”, but have instead chosen to call this an alliance or an affiliation. In the Albany, NY area, “Saratoga Hospital and Albany Medical Center have signed a letter of intent to affiliate, paving the way for a more comprehensive, cost-effective and integrated health care system. Leaders of both hospitals announced plans for the partnership today and expect to finalize the affiliation during 2016.” (Saratoga Hospital, 2016). This has also happened with Columbia Memorial Hospital in Hudson, NY. “Hudson’s Columbia Memorial Hospital and Albany Medical Center are announcing plans today to form a long-term ‘strategic affiliation’ or ‘alliance,’ with the goal of ‘better coordination of care for residents of Columbia and Greene counties and greater operational efficiency for both organizations.’” (Pratt, 2014).
    The effects of these mergers should result in better care to the individuals in Saratoga, NY or in Hudson, NY, as Albany Medical Center is the premiere hospital and medical college in the Capital Region of New York. Since these alliances were formed, the hospitals will not be closed, but will host providers from both organizations under the Albany Medical Center umbrella. There should be no impact to any of these regions, as most critical care is normally performed at Albany Medical Center currently, from each of these respective hospitals.

    Pratt, S. (2014, July 8). Columbia Memorial Hospital and Albany Med announce ‘strategic alliance’. Retrieved from

    Saratoga Hospital. (2016, December 6). Saratoga Hospital Albany Med Affiliation. Retrieved from Saratoga Hospital: