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Health Care Costs and Financing

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Hospital mergers may save less than anticipated

Hospital mergers may produce lower cost (expenses per admission) and price (revenue per admission) savings than previously estimated, according to a study published in the July-August 2001 issue of Health Affairs. The study was sponsored by the Agency for Healthcare Research and Quality (HS09201). The researchers examined changes in costs and prices for nearly 1,800 short-term hospitals from 1989 to 1997. In contrast to previous studies, which just compared merging hospitals with nonmerging hospitals in the same markets, the researchers separated nonmerging hospitals into two groups—those that were rivals of the merging hospitals and those that were not competitors.

When the researchers compared merging hospitals in high HMO-penetration markets with their nonmerging rivals, they found that the former group's average cost savings were only a modest 2.3 percentage points. They also found that the average price growth of merging hospitals in high HMO-penetration markets was almost identical to that of their competitors. On the other hand, the researchers found that mergers in low HMO-penetration markets appear to produce greater cost and price savings for the hospitals involved.

Details are in "Hospital mergers and savings for consumers: Exploring new evidence," by Heather Radach Spang, Ph.D., Gloria Bazzoli, Ph.D., and Richard J. Arnould, Ph.D., in the July/August 2001 Health Affairs 20(4), pp. 150-158.

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