The Effect of Hospital Mergers on Inpatient Prices: A Case Study of the New Hanover-Cape Fear Transaction

The Federal Trade Commission initiated a Hospital Merger Retrospective Project in 2002 to analyze the effects of consummated mergers.  One of the mergers studied was the 1998 acquisition by New Hanover Regional Medical Center (“New Hanover”) of Columbia Cape Fear Memorial Hospital (“Cape Fear”) in Wilmington, North Carolina.  In this paper, we employ patient-level claims data from four different insurers to estimate the effects of this merger on inpatient prices.  Our results provide mixed evidence.  Two of the insurers experienced substantial post-merger price increases relative to the control group of hospitals.  The post-merger price changes for another insurer, however, were comparable to those for the control group, while the fourth insurer actually experienced a significant price decrease following the merger.  Thus, it is difficult to draw conclusions about the impact of this merger on inpatient pricing.