Matt Schmitt finds that size and location help determine how much, if any, costs fall after deals
More than 2,500 U.S.hospitals were involved in mergers or takeovers between 2000 and 2015, and ongoing consolidation is expected to keep antitrust regulators busy for years. To gain regulatory permission for these deals, almost all buyers claim that their plans lead to lower hospital operating costs. The Federal Trade Commission, charged with preserving competitive pricing, generally views these claims favorably when adequately substantiated; all else equal, lower costs should translate into lower prices for insurers and patients.
But evidence of systematically lower costs among merged hospitals has been tough to find. Despite the pace of takeovers, hospital costs have never been higher. They have risen along with the nation's overall health care bill, which in 2014 was more than 10 times the total in 1980, according to the Centers for Medicare and Medicaid Services. Historically, academic research has been unable to prove that mergers systematically make providing hospital services less expensive. And many of the studies have become outdated in the wake of advances in technology, the enormous growth of hospital chains and other industry changes that make today's hospital mergers unlike those of the past.