ESTIMATING DIVERSION RATIOS IN HOSPITAL MERGERS

Cecilia Rossi, Russell Whitehouse and Alex Moore

Journal of Competition Law and Economics, 2019, vol. 15, issue 1, 639-663

Abstract: Understanding patient choice is vital in assessing the closeness of competition between hospitals. The standard technique used in the UK is to estimate substitution patterns based on historical general practitioner (GP) referrals. In this paper we compare the results of the ‘GP referral’ methodology to a demand estimation approach. Using patient-level data over a 3-year period (2012/13–2014/15) we apply both methodologies to every hypothetical merger between hospitals in England, for three specialties. We find a high degree of consistency between the two approaches, suggesting that GP referral analysis is a useful and reliable filter in merger cases. There are a small number of cases, however, in which the GP referral approach filters out potentially problematic mergers. This is particularly true for ‘borderline’ cases. Filtering should therefore be done with caution and in conjunction with additional evidence.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jcomle:v:15:y:2019:i:1:p:639-663.

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Journal of Competition Law and Economics is currently edited by Nicholas Economides, Amelia Fletcher, Michal Gal, Damien Geradin, Ioannis Lianos and Tommaso Valletti

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