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82 Antitrust L.J. 533 (2018-2019)
A Review of the Economic Literature on Cross-Market Health Care Mergers

handle is hein.journals/antil82 and id is 545 raw text is: 














    A   REVIEW OF THE ECONOMIC LITERATURE ON

        CROSS-MARKET HEALTH CARE MERGERS


                               KEITH   BRAND
                             TED  ROSENBAUM*


   Several recent studies in the economics literature examine the price effects
of cross-market  mergers  between  health  care providers in non-proximate
geographies.   These  studies consider whether  such  mergers  lead to higher
prices even though  the providers are not substitutes for patients at the point of
service.2 Especially when taken together, the empirical analyses in this litera-
ture provide  credible evidence  that prices  have  increased following  such
mergers.3  Given these findings, some  have  suggested that a broadened  anti-
trust enforcement  agenda may   be warranted.4

   In general, recent merger enforcement  in this area has focused on whether
the health care providers involved in the merger are substitutes for patients at
the point of service. Therefore, the analysis has primarily focused on whether
a significant amount of patients at one of the parties would divert to the other
party in the event of a network exclusion, and vice-versa. Under this analysis,



   * Keith Brand and Ted Rosenbaum are economists at the Federal Trade Commission. The
views expressed in this article are those of the authors and do not necessarily reflect those of the
Federal Trade Commission. We are grateful for comments from editors Nickolai Levin and Na-
than Wilson as well as Dave Balan, Malcolm Coate, Chris Gannon, Paolo Ramezzana, David
Schmidt, Mike Vita, and Brett Wendling.
   I Matthew S. Lewis & Kevin E. Pflum, Hospital Systems and Bargaining Power: Evidence
from Out-of-Market Acquisitions, 48 RAND J. ECON. 579 (2017); Matt Schmitt, Multimarket
Contact in the Hospital Industry, 10 AM. ECON. J.: EcoN. POL'Y 361 (2018); Gregory S. Vistnes
&  Yianis Sarafidis, Cross-Market Hospital Mergers: A Holistic Approach, 79 ANTITRUST L.J.
253 (2013); Leemore Dafny, Kate Ho & Robin S. Lee, The Price Effects of Cross-Market Hospi-
tal Mergers (Nat'l Bureau of Econ. Research, Working Paper No. 22106, 2017) (forthcoming
RAND   J. ECON.).
   2 While some of the theoretical issues we discuss here are also relevant for the combination
of providers providing separate services (e.g., a pediatric hospital and a rehabilitation hospital),
we do not focus on that type of cross-market merger in this article.
    Dafny et al., supra note 1; Lewis & Pflum, supra note 1.
    4 Dafny et al., supra note 1, at 31.
    I In many applications, substitution between suppliers is measured by diversion ratios, which
give the percentage of volume lost by one supplier under a small price increase that would be


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