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This paper examines the diagnosis related group-level (DRG) price effects of recent hospital mergers and acquisitions that occurred in Ohio and California. Empirical results indicate that hospital mergers and acquisitions increase prices at the DRG level. Further, price increases are greater in DRGs where the merging hospitals gained substantial market share compared to DRGs where the merging hospitals did not gain significant market share. These results suggest that DRG specific-market share plays an important role in a hospital's post-merger pricing strategy. [ABSTRACT FROM AUTHOR]

This paper tests for the existence and magnitude of economies of scale and scope as possible explanations for the recent observed trends in increasing health maintenance organization (HMO) scale (through merger and acquisition) and scope (through greater participation in public enrollee markets) using firm level data from a sample of California HMOs for the time period 1986-1992. The results suggest that economies of scale provide a strong justification for mergers only in the case of relatively small HMOs (i.e. those with fewer than 115,000 enrollees), and economies of scope do not explain the increasing HMO enrollment of public enrollees. [ABSTRACT FROM AUTHOR]