Mergers and Marginal Costs: New Evidence on Hospital Buyer Power

Stuart Craig, Matthew Grennan and Ashley Swanson

No 24926, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We estimate the effects of horizontal mergers on marginal cost efficiencies – an ubiquitous merger justification – using data containing supply purchase orders from a large sample of US hospitals 2009-2015. The data provide a level of detail that has been difficult to observe previously, and a variety of product categories that allows us to examine economic mechanisms underlying “buyer power.” We find that merger target hospitals save on average $176 thousand (or 1.5 percent) annually, driven by geographically local efficiencies in price negotiations for high-tech “physician preference items.” We find only mixed evidence on savings by acquirers.

JEL-codes: I11 L40 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-com and nep-ind
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Published as Stuart V. Craig & Matthew Grennan & Ashley Swanson, 2021. "Mergers and marginal costs: New evidence on hospital buyer power," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 151-178, March.

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