Estimating the Impact of a Hospital Merger Using the Difference-in-Difference of Prices

This paper comments on “The Price Effects of Hospital Mergers: A Case Study of Sutter-Summit Transaction,” by Steven Tenn. I exposit a simple model of differentiated products competition and consider the implications of Tenn’s findings in the context of this model. I find that Tenn provides compelling evidence that the merger led to a price increase at Summit Hospital. The causes of the price increase and the welfare implications of the merger are less clear, particularly since anecdotal evidence suggests that quality increased at Summit Hospital post-merger. A difference-in-difference analysis using quality and quantity data can shed more light on the consequences of the merger.