Consolidation in the Health Care Industry: An Empirical Study of the Impact of Hospital Mergers on Quality of Care in California

Abstract

Health care markets in the United States are becoming increasingly concentrated, both horizontally and vertically. The wave of hospital mergers that have occurred since the late 1990s has had a considerable impact on the U.S. health care industry. Although many have examined the effect of these consolidations on costs and prices of health care, few have studied their effect on quality of care. I use both discharge-level data and hospital-level data to examine the impact of hospital mergers on the quality of health care in California. I find that hospital mergers lead to higher risk-adjusted mortality rates, reflecting a reduction in quality. I also find that this effect is particularly strong for hospitals that merge as equals, relative to target or acquiring hospitals. A stratified analysis by patient mortality risk suggests that the adverse effects of mergers on mortality from high-risk procedures are especially profound. Overall, I conclude that an active enforcement of antitrust policy is essential both to encourage and to protect competition in health care markets. Both federal and state antitrust agencies should consistently monitor trends in mergers among U.S. hospitals and challenge consolidations that could lead to adverse effects on the quality of medical care. Keywords: Hospital Mergers, Inpatient Mortality, Quality, Competition, Event Study