Effects of hospital mergers and acquisitions on prices

Abstract This paper examines the price effects of mergers and acquisitions (M&A) in the US hospital industry, which has witnessed considerable consolidation in the 1990s. Using data from 113 hospitals including 20 acquisitions, we compare the change in revenue per patient, operating cost per patient and operating margins for merging hospitals with nonmerging hospitals located in the same market. Results indicate that hospital acquisitions result in increased revenue per patient and increased operating margins compared to nonmerging hospitals but do not result in lower operating costs. These results imply that acquired hospitals increased prices and improved their operating performance.

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