The Competitive Effects of Not‐for‐Profit Hospital Mergers: A Case Study

Michael G. Vita and Seth Sacher

Journal of Industrial Economics, 2001, vol. 49, issue 1, 63-84

Abstract: Applying conventional horizontal merger enforcement rules to nonprofit hospitals is controversial. Critics contend that the different objective function of not‐for‐profits entities should mitigate competitive concerns about mergers involving nonprofit hospitals. We analyze a merger that reduced the number of competitors (both nonprofit) in the alleged relevant market from three to two. We find that the transaction was followed by significant price increases; we reject the hypothesis that these price increases reflect higher post‐merger quality. This study should help policymakers assess the validity of current merger enforcement rules, especially as they apply to not‐for‐profit enterprises.

Date: 2001
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