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Consolidation in the Medical Care Marketplace: A Case Study from Masschusetts

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  • Jason R. Barro
  • David Cutler

Abstract

This paper examines consolidation in the Massachusetts hospital market. We find that consolidation is driven primarily by a large decline in the demand for hospital beds, resulting from increased enrollment in managed care and technological changes. The drive to consolidate appears through three primary forces: consolidation for closure; consolidation for economies of scale; and consolidation for network creation.

Suggested Citation

  • Jason R. Barro & David Cutler, 1997. "Consolidation in the Medical Care Marketplace: A Case Study from Masschusetts," NBER Working Papers 5957, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5957
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    References listed on IDEAS

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    1. Cutler, David M, 1995. "The Incidence of Adverse Medical Outcomes under Prospective Payment," Econometrica, Econometric Society, vol. 63(1), pages 29-50, January.
    2. Laurence C. Baker & Martin L. Brown, 1997. "The Effect of Managed Care on Health Care Providers," NBER Working Papers 5987, National Bureau of Economic Research, Inc.
    3. Joseph P. Newhouse, 1992. "Medical Care Costs: How Much Welfare Loss?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 3-21, Summer.
    4. David Dranove & Mark Shanley, 1995. "Cost reductions or reputation enhancement as motives for mergers: The logic of multihospital systems," Strategic Management Journal, Wiley Blackwell, vol. 16(1), pages 55-74.
    5. Lichtenberg, Frank R. & Pushner, George M., 1994. "Ownership structure and corporate performance in Japan," Japan and the World Economy, Elsevier, vol. 6(3), pages 239-261, October.
    6. David M. Cutler & Mark McClellan, 1996. "The Determinants of Technological Change in Heart Attack Treatment," NBER Working Papers 5751, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Martin Gaynor & Deborah Haas-Wilson, 1999. "Change, Consolidation, and Competition in Health Care Markets," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 141-164, Winter.
    2. Currie, Janet & Fahr, John, 2004. "Hospitals, managed care, and the charity caseload in California," Journal of Health Economics, Elsevier, vol. 23(3), pages 421-442, May.
    3. Núria Mas, 2013. "Responding to financial pressures. The effect of managed care on hospitals’ provision of charity care," International Journal of Health Economics and Management, Springer, vol. 13(2), pages 95-114, June.
    4. Mas, Nuria & Valentini, Giovanni, 2012. "The importance of technology in the consolidation of hospital markets. The case of the United States," IESE Research Papers D/953, IESE Business School.
    5. Huckman, Robert S., 2006. "Hospital integration and vertical consolidation: An analysis of acquisitions in New York State," Journal of Health Economics, Elsevier, vol. 25(1), pages 58-80, January.
    6. Alan T. Sorensen, 2003. "Insurer‐hospital bargaining: negotiated discounts in post‐deregulation connecticut," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 469-490, December.
    7. Mr. Ken Miyajima, 2005. "Real Exchange Rates in Growing Economies: How Strong Is the Role of the Nontradables Sector?," IMF Working Papers 2005/233, International Monetary Fund.
    8. Mas, Núria & Seinfeld, Janice, 2008. "Is managed care restraining the adoption of technology by hospitals?," Journal of Health Economics, Elsevier, vol. 27(4), pages 1026-1045, July.
    9. Janet Currie & Mehdi Farsi & Bentley MacLeod, 2004. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts," Working Papers 864, Princeton University, Department of Economics, Industrial Relations Section..
    10. Janet Currie & Mehdi Farsi & W. Bentley Macleod, 2005. "Cut to the Bone? Hospital Takeovers and Nurse Employment Contracts," ILR Review, Cornell University, ILR School, vol. 58(3), pages 471-493, April.
    11. Wu, Vivian Y., 2009. "Managed care's price bargaining with hospitals," Journal of Health Economics, Elsevier, vol. 28(2), pages 350-360, March.
    12. Mas, Nuria, 2005. "Managed care and the safety net: More pain for the uninsured?," IESE Research Papers D/596, IESE Business School.
    13. Richard Frank & David S. Salkever, 2000. "Market Forces, Diversification of Activity, and the Mission of No t-for -Profit Hospitals," NBER Chapters, in: The Changing Hospital Industry: Comparing Not-for-Profit and For-Profit Institutions, pages 195-226, National Bureau of Economic Research, Inc.
    14. David M. Cutler & Jill R. Horwitz, 1998. "Converting Hospitals from Not-for-profit to For-profit Status," NBER Working Papers 6672, National Bureau of Economic Research, Inc.

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