- Mergers that significantly reduce the number of hospitals in a local labor market can reduce wage growth for workers like nurses and skilled workers, or those in administrative positions, according to a report in the American Economic Review.
- The study compared markets in which hospital mergers occurred between 2000 and 2010 to those that did not, and then analyzed the effects on wages in the four years following the tie-ups. Researchers used wage data from Medicare Cost Reports to glean insights in three categories of workers: general, skilled, and nurses and pharmacists.
- Four years after these mergers greatly increased hospital concentration, nurses and pharmacy workers wages were 6.8% lower and skilled worker wages were 4% lower than they would have been absent the merger, according to the report.
The study sheds additional light on the impact hospital mergers have on labor markets and workers, an area gaining greater attention from regulators.
The FTC said in the fall that it was particularly interested in more research on the effects mergers have on labor markets and worker wages. It called on researchers to examine these areas, as FTC expanded its program that reviews mergers, looking for additional theories it can potentially use to challenge tie-ups.
This latest research seeks to answer that question following the call from the FTC.
Wage growth slowed for employees whose jobs are industry-specific like nurses. But wages were not depressed for general workers, or blue-collar workers whose skills are not industry-specific, the study found.
Also, nurse unionization and states without right-to-work laws helped mitigate the slowdown in wages.
The FTC has signaled in other ways that workers' wages will become more important.
In a letter to Texas regulators in September, the agency warned that if the state allowed two competitors to merge it would result in depressed wages for registered nurses in rural West Texas. The FTC cited a 2020 study that examined the effects on workers after mergers. In previous exchanges warning state regulators or lawmakers about the consequences of allowing this anticompetitive mergers via COPAs (certificates of public advantage), the FTC did not reference worker wages, a potential signal of the growing importance.
Historically, the FTC has challenged mergers that would likely lead to an increase in prices and alter access to care — not worker wages.
Those challenges can be difficult in court because the FTC has to define the appropriate market for hospital services, an important hurdle in any antitrust case in this sector.
Recently, the FTC abandoned its attempt to stop Jefferson Health's acquisition of Albert Einstein Healthcare Network in Philadelphia. Among other things, the judge took issue with whether the FTC properly defined the relevant markets in the lawsuit.
Looking ahead, if labor market effects took on a leading role in challenging hospital mergers, it may not be an easier argument to win in court. One could argue labor markets are much bigger than patient markets, likely making it more difficult to win in court. The study acknowledges that given this dynamic, the current focus on patient markets may continue to dominate the labor market argument.