Hospital consolidation and costs: another look at the evidence

We investigate whether pairwise hospital consolidation leads to cost savings. We use a unified empirical methodology to assess both systems and mergers. Our comparison group for each consolidation consists of 10 'pseudo-mergers' chosen based on propensity scores. Cost function estimates reveal that consolidation into systems does not generate savings, even after 4 years. Mergers in which hospitals consolidate financial reporting and licenses generate savings of approximately 14%: 2, 3, and 4 years after merger. The system consolidation and merger results are very robust to changes in the specification and the sample.