Hospital consolidation and costs: Another look at the evidence

David Dranove; Richard Lindrooth

doi:10.1016/j.jhealeco.2003.05.001

Hospital consolidation and costs: Another look at the evidence

David Dranove, Richard Lindrooth^*

^*Corresponding author for this work

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Research output: Contribution to journal › Article › peer-review

108 Scopus citations

Abstract

We investigate whether pairwise hospital consolidation leads to cost savings. We use a unified empirical methodology to assess both systems and mergers. Our comparison group for each consolidation consists of 10 'pseudo-mergers' chosen based on propensity scores. Cost function estimates reveal that consolidation into systems does not generate savings, even after 4 years. Mergers in which hospitals consolidate financial reporting and licenses generate savings of approximately 14%: 2, 3, and 4 years after merger. The system consolidation and merger results are very robust to changes in the specification and the sample.

Original language	English (US)
Pages (from-to)	983-997
Number of pages	15
Journal	Journal of Health Economics
Volume	22
Issue number	6
DOIs	https://doi.org/10.1016/j.jhealeco.2003.05.001
State	Published - Nov 2003

Keywords

Hospital competition
Hospital consolidation
Mergers

ASJC Scopus subject areas

Health Policy
Public Health, Environmental and Occupational Health

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

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10.1016/j.jhealeco.2003.05.001

Cite this

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abstract = "We investigate whether pairwise hospital consolidation leads to cost savings. We use a unified empirical methodology to assess both systems and mergers. Our comparison group for each consolidation consists of 10 'pseudo-mergers' chosen based on propensity scores. Cost function estimates reveal that consolidation into systems does not generate savings, even after 4 years. Mergers in which hospitals consolidate financial reporting and licenses generate savings of approximately 14%: 2, 3, and 4 years after merger. The system consolidation and merger results are very robust to changes in the specification and the sample.",

keywords = "Hospital competition, Hospital consolidation, Mergers",

author = "David Dranove and Richard Lindrooth",

note = "Funding Information: Lindrooth gratefully acknowledges support from the Agency for Healthcare Research and Quality (R01 HS10730-01). The authors thank an anonymous referee, Gloria Bazzoli, Peter Kralovec, Will White and participants of the 12th Annual Health Economics Conference and the CHAS Health Economics Workshop for helpful comments. We also thank Federico Ciliberto for programming assistance. ",

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AB - We investigate whether pairwise hospital consolidation leads to cost savings. We use a unified empirical methodology to assess both systems and mergers. Our comparison group for each consolidation consists of 10 'pseudo-mergers' chosen based on propensity scores. Cost function estimates reveal that consolidation into systems does not generate savings, even after 4 years. Mergers in which hospitals consolidate financial reporting and licenses generate savings of approximately 14%: 2, 3, and 4 years after merger. The system consolidation and merger results are very robust to changes in the specification and the sample.

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Hospital consolidation and costs: Another look at the evidence

Abstract

Keywords

ASJC Scopus subject areas

UN SDGs

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