The Price Effects of Hospital Mergers: A Case Study of the Sutter-Summit Transaction

Steven Tenn
Working Paper:
Published In:
International Journal of the Economics of Business

We conduct a retrospective study of the Sutter-Summit hospital merger to assess whether antitrust enforcement in this matter was appropriate.  This consummated merger combined two hospitals located close together in the Oakland-Berkeley region of the San Francisco Bay Area.  The greater metropolitan area contained many other hospitals that offered a similar range of services, but which were located farther away.  A central issue raised by the Sutter-Summit transaction was whether travel costs were low enough such that these hospitals were a sufficient constraint on the merging parties to prevent an anticompetitive price increase.  We use detailed claims data from three large health insurers to compare the post-merger price change for the merging parties to the price change for a set of control group hospitals.  Our results show that Summit’s price increase was among the largest of any comparable hospital in California, indicating this transaction may have been anticompetitive.