Hospital mergers, acquisitions and regulatory policy implications

Abstract

Purpose The purpose of this paper is to review the literature on hospital mergers and acquisitions (M&As). Design/methodology/approach The authors conduct a systematic review of the literature on hospital M&As to summarize their effects upon cost of health care delivery (access), efficiency, market power, cost and price. Implications for health care industry policy are provided. Findings A significant majority of results conclude lower costs, increased efficiency, but higher prices (due to a market concentration effect) following hospital merger or acquisition. These results are consistent with industrial organization theory and suggest that regulatory policy (e.g. price cap regulation) will raise allocative efficiency, consumer surplus and overall market surplus within markets for hospital services. Originality/value This is the first study to review the price, cost and efficiency effects of M&As with respect to industrial organization theory in the context of hospitals. This study also provides regulatory policy implications.