A study calling for increased antitrust scrutiny of hospital mergers could give new hope to federal regulators, who have suffered a string of antitrust losses in federal court.
University of Minnesota researchers have found that while hospital mergers generally deliver the price decreases they promise, some can make prices rise.
Results of the study -- called "Which Types of Hospital Mergers Save Consumers Money?" -- come on the heels of two highly publicized antitrust defeats for the government on Long Island, N.Y., and in Grand Rapids, Mich.
While the study doesn't include information from those mergers, it could provide insight into future ones.
"Right now, there is a strong disagreement as to whether mergers are good or bad," said Robert Connor, the study's chief author and an associate professor at the University of Minnesota's Carlson School of Management. "What I hoped the study would do is shed light on what types of mergers are good or bad."
The study was financed with a $200,000 federal grant. It appears in the current edition of Health Affairs, a peer-reviewed journal of health policy.
The study analyzed changes in costs and prices at 3,500 hospitals, including 122 mergers involving 244 hospitals, from 1986 to 1994. On average, they found the mergers led to price decreases of about 7%.
Also notable among the findings was that mergers in more concentrated -- or competitive -- markets had merger-related cost savings less than half those in less concentrated -- or less competitive -- markets. In fact, they often produced a slight price increase.
How concentrated a market is depends on the number of competitors and how much market share they control. The fewer the competitors or the higher the market share, the more concentrated it is.
"This provides empirical justification for closer antitrust review of hospital mergers in more concentrated markets," the study reported.
Among the other findings:
Mergers in areas with high enrollment in group-model HMOs had greater price savings.
Cost savings were twice as high in mergers of not-for-profit facilities as in for-profit ones.
But the increased cost savings, Connor said, shouldn't be a signal for federal regulators to turn a blind eye to those deals.
What the study didn't look at was the effect of not-for-profit mergers in concentrated markets.