Patient Admission Patterns and Acquisitions of "Feeder" Hospitals
Sayaka Nakamura, Cory Capps and David Dranove, EAG 07-1, January 2007
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Abstract:
Large, urban tertiary care hospitals often acquire outlying community hospitals. One possible motivation
is to increase referrals. Sophisticated acquirers may even attempt to concentrate additional referrals among
more profitable patients. We explore these issues by studying 26 vertical acquisitions in Florida
and New York that occurred in the late 1990s, a peak period for such transactions. We compare
changes in referrals of patients from target market areas to changes in a matched set of control
markets. We find that roughly 30 percent of the vertical acquisitions resulted in a significant
increase in referrals to the acquirer. Very few acquisitions were followed by decreases in referrals.
When acquisitions did lead to increased referrals, the effect was usually largest for patients with
more remunerative insurance and patients undergoing more profitable procedures. However, we
find no evidence that hospitals selectively avoided referrals of patients with severe conditions for
which costs might exceed reimbursements.