Players behind the scenes: common ownership in the hospital industry

Publicly traded firms being held by common owners may affect product prices set by these firms. Common ownership usually refers to a scenario when a few competing firms from the same industry and competing firms are also held by large common owners. Previous literature has studied the anticompetitive effects of common ownership in a few industries. In this paper, we use comprehensive data on 6200 hospitals in the U.S. from the American Hospital Association, Healthcare Cost Report Information System, and Wharton Research Data Services, and we test whether the presence of common ownership in the hospital industry affects hospitals’ charges. We find that common ownership in the hospital industry has anticompetitive effects on hospital prices. Our estimates are also robust to controlling for other compounding effects and under a range of alternative specifications of the model. Specifically, both lagged regressions and difference-in-differences strategies yield statistically significant positive impacts of common ownership on hospital prices, while economic magnitudes of the difference-in-differences results are much larger with more observations in analysis.