Could a merger between rival firms create a stronger second competitor to the market leader in a way that strengthens competition and benefits consumers? The answer is theoretically ambiguous, and little if any empirical economic research squarely addresses this question. Recently, however, the Massachusetts Health Policy Commission (“HPC”) analyzed this very issue in its evaluation of a proposed merger of several hospital systems in the Boston area. Specifically, the HPC evaluated whether the new system, Beth Israel Lahey Health (“BILH”), would be able to compete more effectively with Partners HealthCare (“Partners”), the largest and most expensive healthcare system in the region, and thereby reduce overall healthcare costs.
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