An alternative approach to market definition in the antitrust analysis of hospital mergers

Abstract

In this thesis, I first investigate the widespread methods used in antitrust investigations in the hospital markets. Then, pointing out their ineffectiveness in convincing the courts, I offer a metric called “competitive pressure rate” which is based on Google Maps travel time data as an alternative approach to market definition. I test the effects of the new metric on market prices by an OLS estimation applied to the data from California Office of Health Planning and Development. I provide strong evidence for the existence of correlation between geographic clustering of general acute care hospitals and hospital charges. In particular, I show that a one-unit increase in the competitive pressure rate for normal newborn services would have resulted in a price decrease of 0:71% in 2010 and 0:52% in 2012. This corresponds to annual savings of $9; 448; 000 in 2010 and$7; 582; 000 in 2012