The Impact of Hospital Mergers on Treatment Intensity and Health Outcomes: Working Paper 2011-05

Working Paper
October 6, 2011

Tamara Hayford

Objective. To analyze the impact of hospital mergers on treatment intensity and health outcomes.

Data. Hospital inpatient data from California for 1990 through 2006, encompassing forty mergers.

Study Design. I used a geographic-based IV approach to determine the effect of a zip code’s exposure to a merger. The merged facility’s market share represents exposure, instrumented with combined pre-merge shares. Additional specifications include the Herfindahl index (HHI), instrumented with predicted change in HHI.

Results. The primary specification results indicate that mergers increase the use of bypass surgery and angioplasty by 3.7 percent and inpatient mortality by 1.7 percent above averages in the year 2000 for the average zip code. Isolating the competition mechanism mutes the treatment intensity result slightly, but more than doubles the merger exposure effect on inpatient mortality to an increase of 3.9 percent. The competition mechanism is associated with a sizeable increase in number of procedures.

Conclusions. Unlike previous studies, this analysis finds that hospital mergers are associated with increased treatment intensity and higher inpatient mortality rates among heart disease patients. Access to additional outcome measures such as 30-day mortality and readmission rates might shed additional light on whether the relationship between these outcomes is causal.