HMO consolidations: how national mergers affect local markets

Health Affairs

Volumn 18, Issue 4, 1999, Pages 96-104

  Feldman, Roger D ^a   Wholey, Douglas R ^a   Christianson, Jon B ^b  

^a UNIVERSITY OF MINNESOTA   (United States)

^b UNIVERSITY OF MINNESOTA   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

ARTICLE; COST CONTROL; ECONOMIC ASPECT; ECONOMICS; HEALTH CARE FACILITY; HEALTH CARE POLICY; HEALTH MAINTENANCE ORGANIZATION; HUMAN; LAW; LEGAL ASPECT; UNITED STATES;

ANTITRUST LAWS; COST CONTROL; ECONOMIC COMPETITION; HEALTH FACILITY MERGER; HEALTH MAINTENANCE ORGANIZATIONS; HEALTH POLICY; HUMANS; UNITED STATES;

EID: 0003070301     PISSN: 02782715     EISSN: None     Source Type: Journal    
DOI: 10.1377/hlthaff.18.4.96     Document Type: Article

References (23)

1. "A Giant Continues to Grow," Modern Healthcare, 14 December 1998, 6.
2. "United Health, Humana Deal Is Terminated," Wall Street Journal, 10 August 1998, A3.
3. "Health-Plan Costs to Soar This Year," USA Today, 6 January 1999, A1.
4. Letter from E. Ratcliffe Anderson, president, American Medical Association, to Joel Klein, assistant U.S. attorney general, Antitrust Division, 18 December 1998.
5. R.D. Feldman and R.S. Given, "HMO Mergers and Medicare: The Antitrust Issues," Health Economics (March 1998): 171-174.
6. R.S. Given, "Ensuring Competition in the Market for HMO Services," in Competitive Managed Care, ed. J.D. Wilkerson, K.J. Devers, and R.S. Given (San Francisco: Jossey-Bass Publishers, 1997).
7. See Section 7, 15 U.S. Code, sec. 8; and P.A. Butler, Implications of Health Care Competition for Cost, Choice, Quality, and Innovation: The Role of Antitrust Policy (Portland, Maine: National Academy for State Health Policy, 1996).
8. D.R. Wholey, R.D. Feldman, and J.B. Christianson, "The Effect of Market Structure on HMO Premiums," Journal of Health Economics (May 1995): 81-105; and R.D. Feldman, D.R. Wholey, and J.B. Christianson, "Effect of Mergers on Health Maintenance Organization Premiums," Health Care Financing Review (Spring 1996): 171-189.
9. D.R. Wholey, R.D. Feldman, and J.B. Christianson, "The Effect of Market Structure on HMO Premiums," Journal of Health Economics (May 1995): 81-105; and R.D. Feldman, D.R. Wholey, and J.B. Christianson, "Effect of Mergers on Health Maintenance Organization Premiums," Health Care Financing Review (Spring 1996): 171-189.
10. J.B. Christianson, R.D. Feldman, and D.R. Wholey, "HMO Mergers: Estimating Impact on Premiums and Costs," Health Affairs (November/December 1997): 133-141.
11. The Herfindahl index ranges from zero (a perfectly competitive industry) to 10,000 (monopoly). A market with four equal-size firms would have a Herfindahl index of 2,500.
12. In 1997, 32 percent of all HMO enrollment was allocated with county-specific data and 44 percent with MSA-level data.
13. We count the HMOs operated by Blue Cross as a single national firm. Another view is that these health plans represent a loose affiliation of HMOs rather than a single firm. If Blue Cross is removed from Exhibit 1, the concentration ratio for the next five firms shows a similar pattern over time.
14. These analyses include only enrollment in the counties in MSAs. Including all counties (both urban and rural) where each national firm operates produces very similar results.
15. Horizontal mergers that result in postmerger Herfindahl indices greater than 1,800 with an increase of at least fifty points raise concerns about adverse-competition consequences. Under joint guidelines issued by the U.S. Department of Justice and the ETC, these mergers should be targeted for further analysis. See Given, "Ensuring Competition." All of the markets mentioned by name in this paper as being affected by HMO mergers meet this test.
16. This was also the opinion of market analysts at the time of the merger. "Taking a Chance," Minneapolis Star Tribune, 3 July 1995, D1.
17. Given, "Ensuring Competition."
18. "Phone, Health Care Mileposts," Minneapolis Star Tribune, 2 April 1996, 01.
19. "U.S. Healthcare Cuts Costs, Grows Rapidly, and Irks Some Doctors," Wall Street Journal. 6 September 1994, A1.
20. "Megamergers Shake Up Two Industries," Washington Post, 2 April 1996, A1.
21. Feldman and Given, "HMO Mergers and Medicare."
22. D.R. Wholey et al., "Scale and Scope Economies among Health Maintenance Organizations," Journal of Health Economics (December 1996): 657-684.
23. H.W. Jenkins Jr., "Managed Care, Go Away - You're Too Good for Us!" Wall Street Journal, Interactive Edition, 30 December 1998, online at interactive.wsj.com.