Duke 2008 | ASHE | Equity and Efficiency in Health and Healthcare

In the United States, most commercial health insurance is provided as an employment benefit. This paper explores the effect of employer provision of health insurance on hospital competition. In particular, the paper models the location of the employer executives and investigates whether a merger of hospitals near executives will result in a larger price increase than a merger of competing hospitals elsewhere. This is found to be the case even when the executive has the same opportunity cost of travel as her employees and even when the executive is the sole owner of the firm, retaining all profits. This is consistent with the FTC's findings in its recent challenge of Evanston Northwestern Healthcare's acquisition of Highland Park Hospital. The model is further tested using hospital financial and discharge data from Florida and Texas and CEO location data from the Bureau of Labor Statistics.