AHASTAT: Paper 'throws cold water' on cross-market theory of hospital merger effects

A new paper by two respected economists “throws cold water” on an untested theory that claims competition falls and prices rise when hospitals in distant geographies combine, writes Melinda Reid Hatton, AHA general counsel and senior vice president, in an AHASTAT blog post. Among its flaw, the theory defines geographic markets too restrictively; fails to account for quality improvements, capital investments and the value of system membership; discounts the ability of health plans to replace the hospitals in their networks; and uses highly aggregated data that obscures any price difference among payers, the economists note.