Evolving Antitrust Analysis of Hospital Mergers: How Differences between Patient and Insurer Perspectives Could Create “Cross-Market” Effects

Mergers that expand healthcare systems, even when they combine providers that are unlikely to compete for inpatient discharges, are increasingly under scrutiny. Empirical academic studies have found some evidence of price increases following mergers combining hospitals that are too distant to serve as close substitutes for most patients — i.e. “cross-market” mergers. Economic models can generate such effects by positing scenarios in which provider-insurer negotiations are impacted, without combining hospital systems that are close substitutes for patients. These include mechanisms by which a cross-market merger would affect the set of options available to insurers in constructing provider networks, and mechanisms under which cross-market mergers would affect insurer/provider bargaining without altering the set of possible provider networks. To assess the likely impact of an individual merger, the specific features of the proposed merger and competitive environment should be compared to the proposed theoretical mechanisms under which cross-market mergers may impact prices. 

By Dina Older Aguilar, Andrew Sfekas, Arthur Corea-Smith & Shannon Wu^[1]

I. INTRODUCTION

Markets for inpatient hospital services are generally considered to be geographically compact. Patients are unwilling to travel far for certain services, so providers separated by long distances are considered unlikely to compete with each other. Despite this, empirical academic studies have foun