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How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare

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  • Thomas G. Wollmann

Abstract

US antitrust authorities are only notified of large mergers, so most transactions could escape antitrust scrutiny. I study premerger notification exemptions in the dialysis industry. I find that, in sharp contrast to reportable mergers, exempt ones almost completely avoid enforcement. As a result, exempt mergers increase concentration and reduce healthcare quality, as measured by hospitalization and mortality rates. I then estimate a structural model to simulate the equilibrium response of demand, quality, and enforcement to the elimination of exemptions. I find that the benefits of eliminating exemptions in the dialysis industry far exceed the costs.

Suggested Citation

  • Thomas G. Wollmann, 2020. "How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare," NBER Working Papers 27274, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27274
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    References listed on IDEAS

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    1. Jan Loecker & Jozef Konings & Patrick Cayseele, 2008. "Merger Review: How Much of Industry is Affected in an International Perspective?," Journal of Industry, Competition and Trade, Springer, vol. 8(1), pages 1-19, March.
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    3. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    4. David Autor & David Dorn & Lawrence F Katz & Christina Patterson & John Van Reenen, 2020. "The Fall of the Labor Share and the Rise of Superstar Firms [“Automation and New Tasks: How Technology Displaces and Reinstates Labor”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 645-709.
    5. Michael Elsby & Bart Hobijn & Ayseful Sahin, 2013. "The Decline of the U.S. Labor Share," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 44(2 (Fall)), pages 1-63.
    6. Germán Gutiérrez & Thomas Philippon, 2017. "Investmentless Growth: An Empirical Investigation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 48(2 (Fall)), pages 89-190.
    7. Thomas G. Wollmann, 2019. "Stealth Consolidation: Evidence from an Amendment to the Hart-Scott-Rodino Act," American Economic Review: Insights, American Economic Association, vol. 1(1), pages 77-94, June.
    8. repec:oup:qjecon:v:129:y:2013:i:1:p:61-103 is not listed on IDEAS
    9. Joseph A. Clougherty & Jo Seldeslachts, 2013. "The Deterrence Effects of US Merger Policy Instruments," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1114-1144, October.
    10. Nikhil Agarwal & Itai Ashlagi & Michael A. Rees & Paulo J. Somaini & Daniel C. Waldinger, 2019. "Equilibrium Allocations under Alternative Waitlist Designs: Evidence from Deceased Donor Kidneys," NBER Working Papers 25607, National Bureau of Economic Research, Inc.
    11. Agarwal, Nikhil & Ashlagi, Itai & Rees, Michael & Somaini, Paulo & Waldinger, Daniel, 2019. "An Empirical Framework for Sequential Assignment: The Allocation of Deceased Donor Kidneys," Research Papers 3724, Stanford University, Graduate School of Business.
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    Cited by:

    1. Weichselbaumer, Michael, 2024. "Competition after mergers near review thresholds," International Journal of Industrial Organization, Elsevier, vol. 94(C).
    2. Johannes Boehm & Jan Sonntag, 2023. "Vertical Integration and Foreclosure: Evidence from Production Network Data," Management Science, INFORMS, vol. 69(1), pages 141-161, January.
    3. Petek, Nathan, 2022. "The marginal benefit of hospitals: Evidence from the effect of entry and exit on utilization and mortality rates," Journal of Health Economics, Elsevier, vol. 86(C).

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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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