The effect of mergers on firms' costs: Evidence from the HMO industry

John Engberg, Douglas Wholey, Roger Feldman, Jon B. Christianson

Research output: Contribution to journalArticlepeer-review

8 Scopus citations


We examine the effect of mergers on firms' costs, using a national data set that contains information on both pre- and post-merger costs for firms in the Health Maintenance Organization (HMO) industry. By utilizing data on all HMOs that operated in the United States from 1985 to 1997, we observe enough mergers to obtain estimates of both short-run and relatively permanent merger effects. On average, we do not find evidence that mergers allowed HMOs to realize greater economies of scale or that mergers improved efficiency by shifting the cost function. On the other hand, mergers between HMOs that produce Medicare and other products are likely to create dis-economies of scope that increase costs.

Original languageEnglish (US)
Pages (from-to)574-600
Number of pages27
JournalQuarterly Review of Economics and Finance
Issue number4
StatePublished - Sep 2004

Bibliographical note

Funding Information:
This research was supported by the Robert Wood Johnson Foundation’s Health Care Financing and Organization (HCFO) initiative. The opinions expressed here are solely those of the authors and do not represent those of RAND or any of its sponsors.

Copyright 2004 Elsevier B.V., All rights reserved.


  • Costs
  • Efficiency
  • Market structure
  • Mergers


Dive into the research topics of 'The effect of mergers on firms' costs: Evidence from the HMO industry'. Together they form a unique fingerprint.

Cite this