The Rise Of Cross-Market Hospital Systems And Their Market Power In The US

Fulton, Brent D.; Arnold, Daniel; King, Jaime S.; Montague, Alexandra D.; Greaney, Thomas L.; Scheffler, Richard M.

doi:10.1377/hlthaff.2022.00337

Cited by 10 publications

(8 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Economists who analyze cross-market mergers express concern over the growing number and the potential ability of these enlarged systems to enhance their market power and charge higher prices. 81 Different studies measure different types of cross-market activity, making it difficult to draw firm generalizations; nevertheless, the results from three of these studies are fairly consistent. Our review here is brief; readers can read more detailed summaries elsewhere.…”

Section: Cross-market Mergersmentioning

confidence: 99%

Big Med's Spread

Burns

Pauly

2023

Milbank Quarterly

View full text Add to dashboard Cite

Hospital executives posit a number of rationales for system mergers which lack any basis in academic evidence. Decades of academic research question whether system combinations confer public benefits. Antitrust authorities need to continue to closely scrutinize these transactions. Recently, mergers of hospital systems that span different geographic markets are on the rise. Economists have alerted policymakers about the potential impacts such cross‐market mergers may have on hospital prices. We suggest there are other reasons for concern that scholars have not often confonted. Cross‐market mergers may be conducted for purely self‐serving reasons of organizational growth that increases executive compensation. Combinations of sellers should have clear advantages to consumers. System executives and their boards should bear the burden of proof. Federal regulators and state attorney generals should be cognizant that rationales for cross‐market systems advanced by merging parties are unlikely to be operative or dominant in merger decision making. Policymakers should be careful about passing legislation that encourages hospitals to consolidate. Context There is a growing trend of combinations among hospital systems that operate in different geographic markets known as cross‐market mergers. Economists have analyzed these broader systems in terms of their anticompetitive behavior and pricing power over insurers. This paper evaluates the benefits advanced by these new hospital systems that speak to a different set of issues not usually studied: increased efficiencies, new capabilities, operating synergies, and addressing health inequities. The paper thus “looks under the hood” of these emerging, cross‐market systems to assess what value they might bestow and upon whom. Methods The paper examines recently announced cross‐market mergers in terms of their supposed benefits, as expressed by the systems’ executives as well as by industry consultants. These presumed benefits are then evaluated against existing evidence regarding hospital system outcomes. Findings Advocates of cross‐market hospital mergers cite a host of benefits. Research suggests these benefits are nonexistent. Additional evidence suggests other motives may be at play in the formation of cross‐market mergers that have nothing to do with efficiencies, synergies, or community benefits. Instead these mergers may be self‐serving efforts by system chief executive officers (CEOs) to boost their compensation. Conclusions Cross‐market hospital mergers may yield no benefits to the hospitals involved or the communities in which they operate. The boards of hospital systems that engage in these cross‐market mergers need to exercise greater diligence over the actions of their CEOs.

show abstract

Section: Cross-market Mergersmentioning

confidence: 99%

Big Med's Spread

Burns

Pauly

2023

Milbank Quarterly

View full text Add to dashboard Cite

show abstract

“…1500 hospitals targeted for acquisition in the 2010s, about 55% were in a different commuting zone than the acquiring hospital. 6 It is likely that the COVID-19 pandemic only increased the salience of cross-market mergers, as exemplified by the Atrium-Advocate Aurora merger and potential upcoming deals such as the proposed merger of Iowa-based UnityPoint and New Mexico-based Presbyterian Health.…”

Section: The Uniqueness Of Cross-market Mergersmentioning

confidence: 99%

“…The last decade has seen an explosion in cross-market mergers; the number of hospital systems in urban areas that could potentially exert cross-market power increased from 37 systems in 2009 to 57 systems in 2019. This may be partially attributable to the fact that of the 1500 hospitals targeted for acquisition in the 2010s, about 55% were in a different commuting zone than the acquiring hospital …”

Section: The Rising Prominence Of Cross-market Mergersmentioning

confidence: 99%

Hospital Consolidation: The Rise of Geographically Distant Mergers

Navathe

Connolly

2023

JAMA

View full text Add to dashboard Cite

show abstract

“…3 An important yet unexamined contributing factor might be the recent acceleration in hospital consolidation. 4 As hospitals consolidate, they may close pediatric units to reduce costs and avoid duplication of services. Alter-natively, hospital consolidation may allow small hospitals to keep inpatient units open through efficient sharing of pediatric-focused resources and expertise.…”

Section: Association Between Hospital Consolidation and Loss Of Pedia...mentioning

confidence: 99%

“…This trend is in part due to closure of pediatric inpatient units among small, rural hospitals . An important yet unexamined contributing factor might be the recent acceleration in hospital consolidation . As hospitals consolidate, they may close pediatric units to reduce costs and avoid duplication of services.…”

mentioning

confidence: 99%