The Impact of Hospital Mergers on Treatment Intensity and Health Outcomes

Abstract

Objective. To analyze the impact of hospital mergers on treatment intensity and health outcomes. Data. Hospital inpatient data from California for 1990 through 2006, encompassing 40 mergers. Study Design. I used a geographic-based IV approach to determine the effect of a zip code's exposure to a merger. The merged facility's market share represents exposure, instrumented with combined premerge shares. Additional specifications include Herfindahl Index (HHI), instrumented with predicted change in HHI.Results. The primary specification results indicate that merger completion is associated with a 3.7 percent increase in the utilization of bypass surgery and angioplasty and a 1.7 percent increase in inpatient mortality above averages in 2000 for the average zip code. Isolating the competition mechanism mutes the treatment intensity result slightly, but it more than doubles the merger exposure effect on inpatient mortality to a 3.9 percent increase. The competition mechanism is associated with a sizeable increase in number of procedures. Conclusions. Unlike previous studies, this analysis finds that hospital mergers are associated with increased treatment intensity and higher inpatient mortality rates among heart disease patients. Access to additional outcome measures such as 30-day mortality and readmission rates might shed additional light on whether the relationship between these outcomes is causal. Key Words. Hospitals, mergers, quality Consolidation is a common response to financial and competitive pressures in many markets. The primary concern is often financial: will the merger increase prices? The health care sector involves additional complications. For example, both dimensions of demand for health care services are affected by third parties: treatments are prescribed by physicians while health insurance shields consumers from the full costs of care. Prices do not reflect their demand curve but are instead set by the insurer for public

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