Welfare Standards in Hospital Mergers

K. Katona, M.F.M. Canoy

Research output: Working paperDiscussion paperOther research output

Abstract

There is a broad literature on the consequences of applying different welfare standards in merger control. Specific aspects of health care mergers, however, have not yet been considered. Two features of the health care sector are especially relevant. First, health care providers are possi-bly not profit oriented. Second, consumers can be covered by a mandatory health insurance and pay uniform premiums. The fact and level of payment is not connected to the consumption of health care services, which makes the concept consumer in merger control ambiguous. Previous literature on welfare standards in merger control has often built on the general result that consumer welfare is a more restrictive standard than total welfare. We model mergers on hospital markets and allow for non-profit maximizing behavior of providers and mandatory health insurance. We show that applying a restricted interpretation of consumer in health care merger control can reverse the relation between the two standards. Consumer welfare standard can be weaker than total welfare. Consequently, applying the wrong standard can lead to both clearing socially undesirable and to blocking socially desirable mergers. The possible negative consequences of applying a simple consumer welfare standard in merger control can be even stronger when hospitals maximize quality and put less weight on financial considerations. We also relate these results to the current practice of merger control.
Original languageEnglish
Place of PublicationTilburg
PublisherTILEC
Volume2011-038
Publication statusPublished - 2011

Publication series

NameTILEC Discussion Paper
Volume2011-038

Fingerprint

Mergers
Merger control
Healthcare
Consumer welfare
Health insurance
Payment
Hospital quality
Health care providers
Profit
Premium
Health care services

Keywords

  • merger control
  • hospital merger
  • welfare standard
  • consumer welfare

Cite this

Katona, K., & Canoy, M. F. M. (2011). Welfare Standards in Hospital Mergers. (TILEC Discussion Paper; Vol. 2011-038). Tilburg: TILEC.
Katona, K. ; Canoy, M.F.M. / Welfare Standards in Hospital Mergers. Tilburg : TILEC, 2011. (TILEC Discussion Paper).
@techreport{608a18c92940446eb57a1b68aed8b5eb,
title = "Welfare Standards in Hospital Mergers",
abstract = "There is a broad literature on the consequences of applying different welfare standards in merger control. Specific aspects of health care mergers, however, have not yet been considered. Two features of the health care sector are especially relevant. First, health care providers are possi-bly not profit oriented. Second, consumers can be covered by a mandatory health insurance and pay uniform premiums. The fact and level of payment is not connected to the consumption of health care services, which makes the concept consumer in merger control ambiguous. Previous literature on welfare standards in merger control has often built on the general result that consumer welfare is a more restrictive standard than total welfare. We model mergers on hospital markets and allow for non-profit maximizing behavior of providers and mandatory health insurance. We show that applying a restricted interpretation of consumer in health care merger control can reverse the relation between the two standards. Consumer welfare standard can be weaker than total welfare. Consequently, applying the wrong standard can lead to both clearing socially undesirable and to blocking socially desirable mergers. The possible negative consequences of applying a simple consumer welfare standard in merger control can be even stronger when hospitals maximize quality and put less weight on financial considerations. We also relate these results to the current practice of merger control.",
keywords = "merger control, hospital merger, welfare standard, consumer welfare",
author = "K. Katona and M.F.M. Canoy",
year = "2011",
language = "English",
volume = "2011-038",
series = "TILEC Discussion Paper",
publisher = "TILEC",
type = "WorkingPaper",
institution = "TILEC",

}

Katona, K & Canoy, MFM 2011 'Welfare Standards in Hospital Mergers' TILEC Discussion Paper, vol. 2011-038, TILEC, Tilburg.

Welfare Standards in Hospital Mergers. / Katona, K.; Canoy, M.F.M.

Tilburg : TILEC, 2011. (TILEC Discussion Paper; Vol. 2011-038).

Research output: Working paperDiscussion paperOther research output

TY - UNPB

T1 - Welfare Standards in Hospital Mergers

AU - Katona, K.

AU - Canoy, M.F.M.

PY - 2011

Y1 - 2011

N2 - There is a broad literature on the consequences of applying different welfare standards in merger control. Specific aspects of health care mergers, however, have not yet been considered. Two features of the health care sector are especially relevant. First, health care providers are possi-bly not profit oriented. Second, consumers can be covered by a mandatory health insurance and pay uniform premiums. The fact and level of payment is not connected to the consumption of health care services, which makes the concept consumer in merger control ambiguous. Previous literature on welfare standards in merger control has often built on the general result that consumer welfare is a more restrictive standard than total welfare. We model mergers on hospital markets and allow for non-profit maximizing behavior of providers and mandatory health insurance. We show that applying a restricted interpretation of consumer in health care merger control can reverse the relation between the two standards. Consumer welfare standard can be weaker than total welfare. Consequently, applying the wrong standard can lead to both clearing socially undesirable and to blocking socially desirable mergers. The possible negative consequences of applying a simple consumer welfare standard in merger control can be even stronger when hospitals maximize quality and put less weight on financial considerations. We also relate these results to the current practice of merger control.

AB - There is a broad literature on the consequences of applying different welfare standards in merger control. Specific aspects of health care mergers, however, have not yet been considered. Two features of the health care sector are especially relevant. First, health care providers are possi-bly not profit oriented. Second, consumers can be covered by a mandatory health insurance and pay uniform premiums. The fact and level of payment is not connected to the consumption of health care services, which makes the concept consumer in merger control ambiguous. Previous literature on welfare standards in merger control has often built on the general result that consumer welfare is a more restrictive standard than total welfare. We model mergers on hospital markets and allow for non-profit maximizing behavior of providers and mandatory health insurance. We show that applying a restricted interpretation of consumer in health care merger control can reverse the relation between the two standards. Consumer welfare standard can be weaker than total welfare. Consequently, applying the wrong standard can lead to both clearing socially undesirable and to blocking socially desirable mergers. The possible negative consequences of applying a simple consumer welfare standard in merger control can be even stronger when hospitals maximize quality and put less weight on financial considerations. We also relate these results to the current practice of merger control.

KW - merger control

KW - hospital merger

KW - welfare standard

KW - consumer welfare

M3 - Discussion paper

VL - 2011-038

T3 - TILEC Discussion Paper

BT - Welfare Standards in Hospital Mergers

PB - TILEC

CY - Tilburg

ER -

Katona K, Canoy MFM. Welfare Standards in Hospital Mergers. Tilburg: TILEC. 2011. (TILEC Discussion Paper).