Date of Award

6-2017

Document Type

Open Access

Degree Name

Bachelor of Arts

Second Department

Economics

First Advisor

Douglas Klein

Language

English

Keywords

healthcare, business, price, goods, cost, savings

Abstract

Healthcare is as much a business subject to market dynamics as it is a public service, with enormous sums of money and resources devoted to it. Since a person’s health is one of his or her most valuable assets, healthcare will always be in high demand, regardless of the price of medical goods and services. Considering healthcare’s nature as a necessary good and the irreplaceable importance of a medical facility to its service area, any changes in capacity or method of healthcare delivery may have profound effects on the dependent population. Situations in which a hospital merges with a healthcare system or another hospital exemplify such a change, for mergers entail potentially large-scale alterations to the local healthcare market and to the manner in which care is provided. The number of hospital mergers and acquisitions has been steadily increasing since 2003, with the number of deals growing over 40 percent from 2010 to 2015. A concern is that larger institutions or systems wield greater market power and may gain the ability to control the majority of healthcare delivery in the local area; this decrease in competition can lead to rising costs without comparable improvements in quality. On the other hand, consolidations can also present the opportunity for better integration and efficiency of care, more abundant and valuable technological resources, elimination of duplicate services, collaboration among more adept healthcare providers, and overall cost savings from economies of scale. This study explores the effects of hospital consolidation and resultant operational changes on patient outcomes and the costs associated with their care. Furthermore, the effect of hospital ownership status on quality and cost measures will also be assessed. This thesis differs from existing literature because it is the first known study to use hospital-level data from 2010 to 2014 to analyze whether hospital mergers significantly affect healthcare quality and cost.

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