Gaynor M & Vogt W, (2003)

‘Competition Among Hospitals’

Rand Journal of Economics 34 (4), pp. 764-785

• Empirical investigation into the effect of ownership type (for-profit, not-for-profit, government) on firm conduct in hospital markets.
• Uses cross-section data from California to simulate the effects of mergers between for-profit hospitals, and not-for-profit hospitals.

Key results:

• The merger simulation reveals no difference in the tendencies of not-for-profits versus for-profits to exploit merger-created market power.
• The simulated merger results in postmerger price increases of up to 53%, and changing the firms profit/nonprofit status has little impact on this figure.
• Several court decisions have allowed not-for-profit hospital mergers to go ahead in the face of antitrust concerns, on the grounds that not-for-profit hospitals would not exploit any market power gained. These results suggest that this assumption is mistaken.

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