Cross-Market Hospital Mergers: An Antitrust Theory Challenged by Facts and Law

By Jeffrey W. Brennan

A developing economic literature focuses on price effects from mergers between non-competing hospitals. “Cross-market” mergers occur between hospitals in separate geographic markets. In nearly every analytical respect, they are unlike horizontal and vertical mergers, and neither federal antitrust agency has ever challenged such a merger. These transactions are drawing attention over concerns they may give merging hospitals greater power over price than they individually had before the merger. Central to the theory is the presence of regional employers that provide health insurance coverage to their employees and have employees living or working in each hospital market. The concern is that these employers want individual health insurance products that cover all or most of their employees, and the hospitals can leverage this factor for a higher price as a negotiating entity for multiple hospitals than they could pre-merger for one entity. This article describes the theory’s basic underpinnings and provides commentary on its shortcomings both analytically and under current antitrust jurisprudence.

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