Simulating Hospital Merger Simulations

Authors:
David Balan and Keith Brand
Working Paper:
334 (Revised)

We assess the performance of three hospital merger simulation methods by means of a Monte Carlo experiment. We first specify a rich theoretical model of hospital markets and use it to generate “true” price effects of a large number of hospital mergers. We then use the theoretical model to generate the data that would be available in a real-world prospective merger analysis and apply the merger simulation methods to those data. Finally, we compare the predictions of the merger simulation methods to the true price effects. While there is some heterogeneity in performance, all three simulation methods perform reasonably well.