Comment on "Hospital Mergers and Competitive Effects: Two Retrospective Analyses"

This note explains why the difference-in-differences methodology, as applied by Deborah Haas-Wilson and Christopher Garmon in their paper "Hospital Mergers and Competitive Effects: Two Retrospective Analyses" contained in this issue, does not produce credible results when applied to an assessment of the merger of Evanston and Highland Park Hospital, north of Chicago. Because of data deficiencies, an inability to control adequately for variation in factors that might affect the rate of price changes, and questionable assumptions about the pre-merger equilibrium, the econometric results are inconsistent with other market factors that indicated that the merging hospitals were not close competitors. These market conditions are instead consistent with the view of the largest payer, who opined that the transaction had no effect on its ability to obtain competitive rates.