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Dr. Lawrence Wu

The Evidence Is In: A Review of the Market Definition Debate in Hospital Merger Cases

1 November 1998
By Dr. Lawrence Wu

This article is a review of the market definition debate in hospital merger cases. Relevant market definition has been hotly contested in each and every hospital merger that has been challenged by the Federal Trade Commission and the Department of Justice. In these cases, more attention was devoted to the issue of market definition than any other single issue. Arguments and evidence regarding the ability of consumers to turn to competing alternatives are complicated due, in large part, to the growth and proliferation of new types of health insurance plans and innovative contractual arrangements among hospitals, physicians, and third party payors. It is crucial to understand the commercial realities that influence these third party payors because they play an important role in determining the hospitals to which consumers can turn.

The article also reviews the five hospital merger cases that the antitrust agencies challenged in court from 1995 to 1998. The discussion describes and highlights the types of evidence that were persuasive to the courts regarding market definition and how substitution would or would not occur post-merger. The decisions in these five cases suggest that it is important to produce evidence that sheds light on the mechanism by which substitution is likely to occur.


This article was published in the Antitrust Report, November 1998: 23-41.