DP8802 Can governments do it better? Merger mania and hospital outcomes in the English NHS

Author(s): Martin Gaynor, Mauro Laudicella, Carol Propper
Publication Date: February 2012
Keyword(s): event study, Hospital mergers, political influence, quality
JEL(s): I11, I18, L13, L32
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8802

The literature on mergers between private hospitals suggests that such mergers often produce little benefit. Despite this, the UK government has pursued an active policy of hospital mergers, arguing that such consolidations will bring improvements for patients. We examine whether this promise is met. We exploit the fact that between 1997 and 2006 in England around half the short term general hospitals were involved in a merger, but that politics means that selection for a merger may be random with respect to future performance. We examine the impact of mergers on a large set of outcomes including financial performance, productivity, waiting times and clinical quality and find little evidence that mergers achieved gains other than a reduction in activity. Given that mergers reduce the scope for competition between hospitals the findings suggest that further merger activity may not be the appropriate way of dealing with poorly performing hospitals