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This consummated merger combined two hospitals located close together in the Oakland-Berkeley region of the San Francisco Bay Area. The greater metropolitan area contained many other hospitals that offered a similar range of services, but which were located farther away. A central issue raised by the Sutter-Summit transaction was whether travel costs were low enough such that these hospitals were a sufficient constraint on the merging parties to prevent an anticompetitive price increase. We use detailed claims data from three large health insurers to compare the post-merger price change for the merging parties to the price change for a set of control group hospitals. Our results show that Summit's price increase was among the largest of any comparable hospital in California, indicating this transaction may have been anticompetitive.
This paper examines the price effects of recent hospital mergers and acquisitions. Using data from mergers and acquisitions that occurred in Ohio and California I examine post merger price changes at the level of individual services or Diagnosis Related Groups (DRGs). Results indicate that hospital mergers and acquisitions result in increased prices at the DRG level. Further, price increases are greater in DRGs where the merging hospitals gained substantial market power compared to DRGs where the merging hospitals did not gain significant market power. These results suggest that DRG specific market power plays an important role in a hospital's post-merger pricing strategy.