Growing Pains: The Effect of Hospital Market Consolidation on Health Care Quality and Wages

Abstract

In this thesis, I analyze the impact of hospital consolidation on two key metrics: the quality of health care and the wages of the workers that provide it. I use a difference-in-differences model to estimate the causal effect of significant changes in hospital market concentration on quality metrics and the wages of health care professionals. Using data on 4,793 hospitals from 2014 to 2016, I measure changes in hospital consolidation by calculating the Herfindahl- Hirschman Index (HHI) of the health care markets in question. The ‘treatment’ to a hospital in the difference-in-differences model is being located in a market that experienced significant consolidation from 2014 to 2015. I find no causal link between hospital consolidation and quality of care; mortality and readmission rates for acute myocardial infarction, heart failure and pneunomia did not increase after a significant consolidation event in a market. The wages of most studied health care professionals increased by less in areas that had significant consolidation, with the exception of registered nurses, who may have the benefit of strong unionization. The 10th percentile of health care practitioner wages increased in areas with significant system expansion, likely due to the consolidation of lower skill jobs across the system leading to higher wages for retained employees. My work calls into question the claims that hospital mergers lead to better health outcomes and suggests that mergers can slow wage growth of health care practitioners. This could have implications for anti-trust policy and enforcement for future hospital merger and acquisition activity.