Hospital concentration and bed capacity

ABSTRACT

The COVID-19 pandemic has highlighted the importance of hospital bed capacity. Some policy experts claim that hospital mergers and lax antitrust oversight contributed to hospital bed shortages in the United States. This paper investigates the relationship between hospital concentration and bed capacity using public data and panel data methods. No evidence is found that increasing hospital concentration leads to reduced capacity. If anything, the evidence suggests the opposite: a small positive association between concentration and hospital bed capacity. The evidence suggests that the antitrust agencies are correct to focus on price, cost, quality, and access to care instead of overall bed capacity in their evaluation of hospital mergers.

KEYWORDS:

• Hospital mergers
• antitrust
• capacity
• concentration

Acknowledgments

I would like to thank Kevin Kennedy and William Johnson for their assistance with HCCI’s HMI files.

Disclosure statement

The author is also a Senior Consultant with Compass Lexecon, an economic consulting firm.

Data Availability

The underlying data and code necessary to replicate the results can be found at Code Ocean: https://codeocean.com/capsule/8708712/tree

Notes

¹ Flynn and Knox (2020); See also Blad (2020) and Sarwari (2020), in which similar arguments are made.

² Dranove, Shanley, and Simon (1992), Goddard (2015).

³ Gaynor, Ho, and Town (2015).

⁴ https://www.cms.gov/Research-Statistics-Data-and-Systems/Downloadable-Public-Use-Files/Cost-Reports

⁵ https://healthcostinstitute.org/hcci-originals/healthy-marketplace-index/hmi

⁶ See U.S. Department of Justice and Federal Trade Commission’s Horizontal Merger Guidelines, 19 August 2010, Section 5.3 (Market Concentration), https://www.justice.gov/atr/horizontal-merger-guidelines-08192010

⁷ These covariates are taken from the 2019 Area Health Resources File compiled by the Health Resources and Services Administration.

⁸ Guth, Garfield, and Rudowitz (2020).

⁹ Beans (2016).