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Hospital mergers within state borders drive up costs

There’s a growing – and troubling – body of evidence that hospital mergers lead to higher prices. In other words, insurers, employers — we all tend to pay more for C-sections, heart surgery and hip replacements as hospitals get bigger and more powerful.

For more than 40 years, a handful of economists, anti-trust lawyers and health policy wonks have worried hospitals that merge, but operate in entirely different markets — so-called “cross-market mergers” — drive up prices.

But for decades the evidence has been more anecdotal.

This new paper from Northwestern Kellogg School of Management’s Leemore Dafny and her co-authors Columbia’s Kate Ho and Harvard’s Robin Lee provides definitive proof that when hospitals make these sorts of deals, they tend to hurt employers and consumers.