Hostname: page-component-848d4c4894-wzw2p Total loading time: 0 Render date: 2024-05-17T00:13:58.141Z Has data issue: false hasContentIssue false
  • English
  • Français

Employer-provided health insurance and hospital mergers

Published online by Cambridge University Press:  25 January 2013

Christopher Garmon
Christopher Garmon*
Affiliation:
Bureau of Economics, Federal Trade Commission, Washington, DC, USA
*
*Correspondence to: Dr Christopher Garmon, Bureau of Economics, Federal Trade Commission, 601 New Jersey Avenue NW, Mail Drop NJ4264, Washington, DC 20001, USA. Email: cgarmon@ftc.gov
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper explores the impact of employer-provided health insurance on hospital competition and hospital mergers. Under employer-provided health insurance, employer executives act as agents for their employees in selecting health insurance options for their firm. The paper investigates whether a merger of hospitals favored by executives will result in a larger price increase than a merger of competing hospitals elsewhere. This is found to be the case even when the executive has the same opportunity cost of travel as her employees and even when the executive is the sole owner of the firm, retaining all profits. This is consistent with the Federal Trade Commission's findings in its challenge of Evanston Northwestern Healthcare's acquisition of Highland Park Hospital. Implications of the model are further tested with executive location data and hospital data from Florida and Texas.

Type
Articles
Information
Health Economics, Policy and Law , Volume 8 , Issue 3 , July 2013 , pp. 365 - 384
Copyright
Copyright © Cambridge University Press 2013 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Adams, G.Noether, M. (2011), ‘Comment on “hospital mergers and competitive effects” ’, International Journal of the Economics of Business, 18(1): 33–40.CrossRefGoogle Scholar
Bernstein, M. B. (2009), ‘Diagnosing the FTC's merger enforcement in the Healthcare Industry’, Antitrust Health Care Chronicle December: 2–5.Google Scholar
Bertrand, M.Mullainathan, S. (2001), ‘Are CEOs rewarded for luck? The ones without principles are’, Quarterly Journal of Economics, 116(3): 901–932.CrossRefGoogle Scholar
Binmore, M., Rubinstein, A.Wolinsky, A. (1986), ‘The Nash bargaining solution in economic modelling’, Rand Journal of Economics, 17(2): 176–188.CrossRefGoogle Scholar
Campbell, T. (2007), ‘Defending hospital mergers after the FTC's unorthodox challenge to the Evanston Northwestern – Highland Park transaction’, Annals of Health Law, 16: 213–239.Google Scholar
Capps, C.Dranove, D. (2004), ‘Hospital consolidation and negotiated HMO prices’, Health Affairs, 23(2): 175–181.CrossRefGoogle Scholar
Capps, C., Dranove, D.Satterthwaite, M. (2003), ‘Competition and market power in option demand markets’, Rand Journal of Economics, 34(4): 737–763.CrossRefGoogle ScholarPubMed
Carroll, W., Miller, G. (2011), ‘Health Insurance Status of Full-Time Workers by Demographic and Employer Characteristics, 2008’, Medical Expenditure Panel Survey Statistical Brief no. 317, Agency for Healthcare Research and Quality, http://meps.ahrq.gov/mepsweb/data_files/publications/st317/stat317.pdf.Google Scholar
Dranove, D., Lindrooth, R., White, W.Zwanziger, J. (2008), ‘Is the impact of managed care on hospital prices decreasing?’, Journal of Health Economics, 27: 362–376.CrossRefGoogle ScholarPubMed
Farrell, J., Balan, D., Brand, K.Wendling, B. (2011), ‘Economics at the FTC: hospital mergers, authorized generic drugs, and consumer credit markets’, Review of Industrial Organization, 39: 271–296.CrossRefGoogle Scholar
Gal-Or, E. (1999), ‘Mergers and exclusionary practices in health care markets’, Journal of Economics and Management Strategy, 8(3): 315–350.Google Scholar
Haas-Wilson, D.Garmon, C. (2011), ‘Hospital mergers and competitive effects: two retrospective analyses’, International Journal of the Economics of Business, 18(1): 17–32.CrossRefGoogle Scholar
Haas-Wilson, D.Vita, M. (2011), ‘Mergers between competing hospitals: lessons from retrospective analyses’, International Journal of the Economics of Business, 18(1): 1–4.CrossRefGoogle Scholar
Melnick, G.Keeler, E. (2007), ‘The effects of multi-hospital systems on hospital prices’, Journal of Health Economics, 26: 400–413.CrossRefGoogle ScholarPubMed
Office of Fair Trading (2011), ‘Private Healthcare Market Study: Report on the Market Study and Proposed Decision to Make a Market Investigation Reference’, http://www.oft.gov.uk/shared_oft/market-studies/OFT1396_Private_healthcare.pdf [18 October 2012].Google Scholar
O'Reilly, C. A. IIIMain, B. G. M. (2010), ‘Economic and psychological perspectives on CEO compensation: a review and synthesis’, Industrial and Corporate Change, 19: 675–712.CrossRefGoogle Scholar
Rice, E. L. (2010), ‘Evanston's legacy: a prescription for addressing two-stage competition in hospital merger antitrust analysis’, Boston University Law Review, 90: 431–463.Google Scholar
Romano, P. S.Balan, D. J. (2011), ‘A retrospective analysis of the clinical quality effects of the acquisition of highland park hospital by Evanston Northwestern Healthcare’, International Journal of the Economics of Business, 18(1): 45–64.CrossRefGoogle Scholar
Salop, S. (1979), ‘Monopolistic competition with outside goods’, The Bell Journal of Economics, 10(1): 141–156.CrossRefGoogle Scholar
Stole, L.Zwiebel, J. (1996), ‘Intra-firm bargaining under non-binding contracts’, Review of Economic Studies, 63: 375–410.CrossRefGoogle Scholar
Town, R.Vistnes, G. (2001), ‘Hospital competition in HMO networks’, Journal of Health Economics, 20: 733–753.CrossRefGoogle ScholarPubMed
Vogt, W. B., Town, R. (2006), ‘How has Hospital Consolidation Affected the Price and Quality of Hospital Care?’, Robert Wood Johnson Foundation Research Synthesis Report no. 9, http://www.rwjf.org/pr/product.jsp?id=15231.Google Scholar