EI Principal David A. Argue reviews studies recently published by the FTC regarding its hospital mergers retrospective price analyses, including the study at the core of the Commission’s findings in the Evanston Northwestern matter.

The Federal Trade Commission’s (FTC’s) Hospital Merger Retrospectives Project resulted in an administrative trial against Evanston Northwestern Healthcare in 2005 and an ultimate finding that the hospital system had gained market power and increased its prices more than it would have in a competitive market. Three recently released FTC papers describe in some detail the staff’s model for estimating hospital price changes and the findings from four post-merger investigations. FTC staff attempts to control for many different demand-side and supply-side factors that could affect price by explicitly including those factors in the model and by using comparisons with control groups of hospitals. Nevertheless, some important factors—most notably changes in quality—are omitted. The results themselves leave some unanswered questions as well. Given the FTC’s increasingly aggressive posture toward hospital mergers and some of the new empirical tools it is employing in its reviews, it is important that its analysis withstand scrutiny. Full Paper