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 language||English (US)|
|Number of pages||27|
|Journal||Quarterly Review of Economics and Finance|
|State||Published - Sep 2004|
Bibliographical noteFunding 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.
- Market structure