Is There Too Little Antitrust Enforcement in the US Hospital Sector?

The $1.3 trillion US hospital sector accounts for 6% of national GDP. Over the past 20 years, there have been well over 1,000 mergers among the nation's approximately 5,000 hospitals. During that period, the FTC took enforcement action against 13 transactions. This research, joint with Zarek Brot-Goldberg (University of Chicago), Stuart V. Craig (University of Wisconsin–Madison), and Lev Klarnet (Harvard University), examines whether there is too little antitrust enforcement in the US hospital sector. To do that, the authors examine whether there were consummated mergers that could have been predicted, using standard screening tools available to the FTC, to lessen competition and which did raise prices.

The authors find that, from 2002 to 2020, 20% of transactions (238) could have been flagged by the FTC using standard merger screening tools as likely to lessen competition and raise prices. Using data on the prices hospitals negotiate with insurers, the authors find that mergers that occurred between 2010 and 2015 that could have been flagged by the FTC did lead to overall price increases of 5% or more via increases in both inpatient and outpatient prices. These results highlight that existing pre-merger screening tools can identify problematic mergers and that predictably harmful mergers generate large price increases. The authors conclude there has been underenforcement of antitrust laws in the US hospital industry.

Abstract and Citation

Brot-Goldberg, Z, Cooper, Z, Craig, SV, and Klarnet, L. (Forthcoming). “Is There Too Little Antitrust Enforcement in the US Hospital Sector?” American Economic Review: Insights.

Abstract

From 2002 to 2020, there were over 1,000 mergers of US hospitals. During this period, the Federal Trade Commission (FTC) took enforcement actions against 13 transactions. However, using the FTC’s standard screening tools, we find that 20% of these mergers could have been predicted to meaningfully lessen competition. We then show that, from 2010 to 2015, predictably anticompetitive mergers resulted in price increases over 5%. We estimate that approximately half of predictably anticompetitive mergers had to be reported to the FTC per the Hart-Scott-Rodino Act. We conclude that there appears to be underenforcement of antitrust laws in the hospital sector.

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In The News

Yale health economist Zack Cooper testifies before the U.S. Senate Finance Committee on the effects of hospital mergers on the country’s health system.

In The News

Yale health economist Zack Cooper testifies before the U.S. Senate Finance Committee on the effects of hospital mergers on the country’s health system.

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