- An examination of states' merger review powers found states that had more robust authority challenged a higher percentage of hospital mergers compared to states with less authority.
- Researchers reviewed a 10-year time period in which 862 hospital mergers were proposed and just 42, or 5%, were challenged by states. A significant chunk of those deals faced challenges in eight states where merger review authority was more robust. Specifically, those eight states challenged 71% of the overall 42 challenges.
- Still, even after the challenges, hospital prices in these eight states continued to rise at similar rates as other states. That's likely because these select states "allowed mergers to proceed with conditions that did not adequately address competitive concerns," a recent report in Health Affairs found.
More than 1,500 hospital mergers occurred over the two decades between 1998 and 2017 with consequences for hospital prices and quality, as research shows mergers tend to result in higher prices without improving quality.
The latest study from Health Affairs explains how states can be the first line of defense, which may be especially important if federal regulators do not step in.
"States could play a critically important role in addressing poorly functioning hospital markets," researchers said.
Currently, federal regulators must be alerted of a deal when it meets or exceeds $92 million. But, as researchers point out, "most [hospital] mergers fell below the federal notification threshold" between 2016 and 2020.
Without federal oversight, it provides an opportunity for state regulators to fill the gap. And in many instances, states have a broader authority for reviewing deals beyond an anticompetitive scope, researchers said, including focusing on "objectives such as protecting charitable assets."
This latest study sought to analyze how merger review authority affected the number of deals that were challenged, the change in market concentration, and the change in hospital prices.
Although states with greater review authority challenged a higher number of deals, it did little to deter price growth as "these challenges frequently resulted in conditional approval" that did not address ways to deter price increases.
Examining these eight states further could provide valuable insights into how to improve merger reviews, researchers concluded.