Unresolved Questions Relating to Market Definition in Hospital Mergers

Abstract

It is generally recognized that market definition by itself does not provide guidance regarding the likely competitive effects of a merger, but, rather, provides the framework in which to assess the likelihood that a merger will facilitate the anticompetitive exercise of market power. Due to academic scholarship and to work by the FTC to attempt to assess the “direct effects” of consummated hospital mergers, market definition has become a less contentious and dispositive issue in the antitrust assessment of hospital mergers. In this article, we discuss remaining controversies related to both product and geographic dimensions of market definition in hospital mergers. We discuss why a traditional interpretation of hospital product markets may be inconsistent with the ongoing evolution of how health care is delivered. We also discuss the econometric methodologies that have recently been used to assess competition between hospitals, and provide some cautionary notes regarding their reliability.