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• Other Article | New England Journal of Medicine

  Does CVS–Aetna Spell the End of Business as Usual?

  Leemore S. Dafny

  Citation:

  Dafny, Leemore S. "Does CVS–Aetna Spell the End of Business as Usual?" New England Journal of Medicine 378, no. 7 (February 15, 2018): 593–595.  View Details

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• Article | Health Affairs

  Narrow Networks on the Health Insurance Marketplaces: Prevalence, Pricing, and the Cost of Network Breadth

  Leemore S. Dafny, Igal Hendel, Victoria Marone and Christopher Ody

  Anecdotal reports and systematic research highlight the prevalence of narrow-network plans on the Affordable Care Act’s health insurance Marketplaces. At the same time, Marketplace premiums in the period 2014–2016 were much lower than projected by the Congressional Budget Office in 2009. Using detailed data on the breadth of both hospital and physician networks, we studied the prevalence of narrow networks and quantified the association between network breadth and premiums. Controlling for many potentially confounding factors, we found that a plan with narrow physician and hospital networks was 16% cheaper than a plan with broad networks for both, and that narrowing the breadth of just one type of network was associated with a 6%–9% decrease in premiums. Narrow-network plans also have a sizable impact on federal outlays, as they depress the premium of the second-lowest-price silver plan, to which subsidy amounts are linked. Holding all else constant, we estimate that federal subsidies would have been 10.8% higher in 2014 had Marketplaces required all plans to offer broad provider networks. Narrow networks are a promising source of potential savings for other segments of the commercial insurance market.

  Keywords: Health Care and Treatment; Insurance; Cost; United States;

  Citation:

  Dafny, Leemore S., Igal Hendel, Victoria Marone, and Christopher Ody. "Narrow Networks on the Health Insurance Marketplaces: Prevalence, Pricing, and the Cost of Network Breadth." Health Affairs 36, no. 9 (September 2017).  View Details

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• Working Paper | 2018

  The Price Effects of Cross-Market Mergers: Theory and Evidence from the Hospital Industry

  Leemore S. Dafny, Katherine Ho and Robin S. Lee

  So-called “horizontal mergers" of firms whose products are direct substitutes at the point of sale have garnered significant attention from researchers and regulators alike. We consider the effect of mergers between firms whose products are not viewed as direct substitutes for the same good or service, but are bundled by a common intermediary. Focusing on the case of hospital mergers across distinct geographic markets (“cross-market" mergers), we show that such combinations can reduce competition among the merging firms for inclusion in insurers' networks, leading to higher prices (or lower-quality care). The result derives from the presence of “common customers" (i.e. purchasers of insurance plans) who value hospitals belonging to both merging parties, as well as (one or more) “common insurers" with which price and network status is negotiated. We test our theoretical predictions using two samples of cross-market hospital mergers, focusing exclusively on hospitals that are bystanders rather than the likely drivers of the transactions in order to address concerns about the endogeneity of merger activity. We find that hospitals gaining system members in-state (but not in the same geographic market) experience price increases of 7-10 percent relative to control hospitals, while hospitals gaining system members out-of-state exhibit no statistically significant changes in price. The former group are likelier to share common customers and insurers. The results suggest that cross-market, within-state hospital mergers increase hospital systems' leverage when bargaining with insurers.

  Keywords: Mergers and Acquisitions; Markets; Geographic Scope; Price; Outcome or Result; Insurance; Health Industry;

  Citation:

  Dafny, Leemore S., Katherine Ho, and Robin S. Lee. "The Price Effects of Cross-Market Mergers: Theory and Evidence from the Hospital Industry." NBER Working Paper Series, No. 22106, June 2018. (Revised and resubmitted, RAND Journal of Economics.)  View Details

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