Different Forms of Integration
The goal for today’s class is to consider forms of consolidation other than traditional within-market horizontal integration. We’ll focus on the following areas and papers:
Vertical Integration
Most people think of competition horizontally, but vertical integration (between physicians and hospitals, or between hospitals and insurers) has become very common in healthcare. We’ll discuss Cuesta, Noton, and Vatter (2019) and Koch, Wendling, and Wilson (2021) as examples of work in this area.
Out-of-market Consolidation
We have a good understanding of how horizontal integration can affect prices within the same geographic market, but we’ve seen more and more hospital mergers in which the merging parties are in separate geographic markets. Such mergers are difficult to analyze empirically without a good understanding of how such mergers affect prices. We’ll discuss Dafny, Ho, and Lee (2019) and Schmitt (2018) as examples of work in this area. Dafny, Ho, and Lee (2019) sets forth a common customer argument, and Schmitt (2018) considers the role multi-market contact. There is a much older literature on multi-market contact, but Schmitt (2018) was the first to consider this in the context of hospitals.