Hospital consolidation and quality: Opening the behavioral black box

Compared to its impact on price and cost, much less is known about the impact of hospital consolidation on quality. This is remarkable given that prospective quality improvements are often the main benefit cited by consolidation proponents. This paper develops a two-part conceptual model that explores the circumstances and motivations under which consolidating hospitals would also decide to take actions which increase quality. It briefly reviews more than three decades of research findings that provide little evidence for claims of improved quality from consolidation. It analyzes four sets of circumstances that might predict such quality-improving actions, and finds little evidence that any of them follow mergers. The paper explores firm profit maximization as the hospital's objective but then considers an alternative model in which any financial surplus generated by consolidation is be invested in quality improvement by a utility-maximizing nonprofit firm.