The Importance of Substitution in Assessing Health Care Provider Mergers

• Author: Nathan E. Wilson,Brett W. Wendling
• DOI: 10.1177/0003603X1405900305
• Published date: 01 September 2014
• Date: 01 September 2014
• Subject Matter: Hospital Mergers—Articles & Commets

THE ANTITRUST BUL L E T I N :Vol. 59, N o. 3/Fall 2 014 :515

The importance of

substitution in assessing

health care provider mergers

BYBRETT W. WENDLI NG*AND NATHAN E. WILSO N**

As the number of challenged health care mergers has risen, so too has

inte rest in t he too ls use d to ass ess ma rket p ower i n heal th care

markets. Some have expressed concern about the differences between

the an alyt ical m etho dol ogy us ed in he alth care m arke ts and t he

met ho ds c om mo nl y us ed i n oth er i nd us tr ie s. We ar gu e th at ,

whatever the market, antitrust analysis’s underlying goal should be

to understand substitution patterns between the merging parties. The

methods used to address the unique institutional features of

healthcare markets should wax (or wane) with their ability to address

that fundamental issue. Although the suite of tools used by enforcers

to assess the consequences of health care mergers remains a work in

progress, at present, analyses that employ diversion ratios and

wi lli ng ne ss -t o- pa y ca pt ur e su bs ti tu tio n pa tt er ns b et te r th an

alternatives and represent the state of the art.

KEY WORDS:antitrust, healthcare competition, provider markets

© 2014by Federal Legal Publications, Inc.

* Economist, Bureau of Economics, Federal TradeCommission.

** Economist, Bureau of Economics, Federal Trade Commission.

AUTHORS’ NOTE: The views expressed in this paper are ours and do not necessarily

represent the viewsof the Federal Trade Commission or anyindividual Commissioner.