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Limits of the Elzinga-Hogarty Test in Hospital Mergers: The Evanston Case

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  • Kenneth Elzinga
  • Anthony Swisher

Abstract

The Elzinga-Hogarty (E-H) test for geographic market definition has been widely used by both government enforcement agencies and merging parties in hospital merger cases. However, two characteristics of hospital services markets - the Silent Majority Fallacy and the Payer Problem - may tend to undermine the utility of the E-H test in hospital merger cases. Where direct evidence of anticompetitive effects attributable to a merger is available, its use may diminish the need to rely on geographic market definition tools such as the E-H test. Such direct evidence is most readily available in post-closing merger challenges such as the FTC's Evanston case. It remains to be seen, however, whether the E-H test will continue to be relied on in more traditional, pre-closing merger challenges.

Suggested Citation

  • Kenneth Elzinga & Anthony Swisher, 2011. "Limits of the Elzinga-Hogarty Test in Hospital Mergers: The Evanston Case," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 133-146.
    • Handle: RePEc:taf:ijecbs:v:18:y:2011:i:1:p:133-146
    DOI: 10.1080/13571516.2011.542963
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    References listed on IDEAS

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    1. Cory S. Capps & David Dranove & Shane Greenstein & Mark Satterthwaite, 2001. "The Silent Majority Fallacy of the Elzinga-Hogarty Criteria: A Critique and New Approach to Analyzing Hospital Mergers," NBER Working Papers 8216, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Samuel Kleiner & William White & Sean Lyons, 2015. "Market power and provider consolidation in physician markets," International Journal of Health Economics and Management, Springer, vol. 15(1), pages 99-126, March.
    2. Yongmin Chen & Marius Schwartz, 2015. "Churn vs. Diversion: An Illustrative Model," Working Papers gueconwpa~15-15-07, Georgetown University, Department of Economics.
    3. Martin S. Gaynor & Samuel A. Kleiner & William B. Vogt, 2013. "A Structural Approach to Market Definition With an Application to the Hospital Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 61(2), pages 243-289, June.
    4. Anne‐Fleur Roos & Ramsis R. Croes & Victoria Shestalova & Marco Varkevisser & Frederik T. Schut, 2019. "Price effects of a hospital merger: Heterogeneity across health insurers, hospital products, and hospital locations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1130-1145, September.
    5. Joseph Farrell & David Balan & Keith Brand & Brett Wendling, 2011. "Economics at the FTC: Hospital Mergers, Authorized Generic Drugs, and Consumer Credit Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 39(4), pages 271-296, December.
    6. Julie Carlson & Ginger Zhe Jin & Matthew Jones & Jason O’Connor & Nathan Wilson, 2017. "Economics at the FTC: Deceptive Claims, Market Definition, and Patent Assertion Entities," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(4), pages 487-513, December.
    7. Yongmin Chen & Marius Schwartz, 2016. "Churn Versus Diversion in Antitrust: An Illustrative Model," Economica, London School of Economics and Political Science, vol. 83(332), pages 564-583, October.
    8. Pietrzak, Michał & Roman, Monika & Mucha, Marcin, 2016. "Geographical delineation of sugar market basing on Eliznga-Hogarty method," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 249432, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
    9. H. Frech & Christopher Whaley & Benjamin Handel & Liora Bowers & Carol Simon & Richard Scheffler, 2015. "Market Power, Transactions Costs, and the Entry of Accountable Care Organizations in Health Care," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(2), pages 167-193, September.
    10. Orley Ashenfelter & Daniel Hosken & Michael Vita & Matthew Weinberg, 2011. "Retrospective Analysis of Hospital Mergers," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(1), pages 5-16.
    11. Kenneth G. Elzinga & Vandy M. Howell, 2018. "Geographic Market Definition in the Merger Guidelines: A Retrospective Analysis," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 53(3), pages 453-475, November.
    12. Pierre Polzin & José Borges & António Coelho, 2016. "A decision support method to identify target geographic markets for health care providers," Papers in Regional Science, Wiley Blackwell, vol. 95(4), pages 843-863, November.

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