Hospital mergers kill jobs, and workers: Economists

Hospital mergers kill workers, a team of economists concludes in a new working paper published by the National Bureau of Economic Research.

The economists looked at data on 304 U.S. mergers that took place between 2010 and 2015 and involved at least two hospitals that were within 50 miles of each other.

The mergers increased health care prices an average of 1.2% within two years.

Every 1% increase in health care prices cut payroll and employment outside the health sector by 0.4% and increased unemployment by 0.1 percentage points.

About 1 in 140 of the workers who lost their jobs because of the hospital-merger-driven health care cost increases died from a suicide or a drug overdose within a year of starting to collect unemployment insurance benefits, the economists estimated.

The paper

A working paper is an academic paper that has not yet gone through a full peer review and academic publishing process.

Zak Brot-Goldberg, the lead author of the working paper, is an assistant professor at the University of Chicago’s public policy school. The five co-authors include Harvard, Yale and University of Wisconsin faculty members, a U.S. Treasury Department employee and an Internal Revenue Service employee.

The analysis

The economists estimate that the average hospital merger in their sample wiped out 39 jobs.

The 125 most anticompetitive mergers increased prices by more than 5%, wiped out an average of 203 jobs, and led to 1 to 2 from suicide or drug overdoses, the economists found.

Most of the people who died from “deaths of despair” were earning just $20,000 to $100,000 per year before they lost their jobs.

The deaths-of-despair mortality results for working-age people stayed about the same when the economists excluded different groups of counties facing unusually tough challenges, such as the counties that ranked in the bottom 25% in 2009 in terms of income.

The economists tried to filter out the direct effect of cost care increases from the impact analysis by looking at cancer mortality.

Cancer mortality in the counties studied stayed about the same for people of all ages.

The economists tried to filter out the effects of factors other than job loss on by looking at suicide and overdose mortality for people over 65, who are mostly out of the workforce.

Suicide and overdose for people over 65 also stayed about the same.

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In addition to killing people, a 1% increase in health care costs caused by a typical hospital merger likely decreases federal tax revenue by $1.3 million and increases the cost of unemployment insurance by 2.5%, the economists estimated.

The economists suggest that their paper shows why regulators should identify and block hospital mergers that will lead to significantly higher prices.

“Ultimately,” the economists write, “this work highlights that health care price growth is generating severe macroeconomic and social consequences in the U.S. In the absence of concrete steps to address health care price growth, rising health spending will raise labor costs and reduce business dynamism outside the health sector, put pressure on the federal budget, and exacerbate income inequality. Rising health care spending will also precipitate suicides and overdoses.”