Master Thesis Defense: Fatih Çakmak

An Alternative Approach to Market Definition in the Antitrust Analysis of Hospital Mergers

Fatih Çakmak
Economics, M.Sc. Thesis, 2015

Thesis Jury
Eren İnci (Thesis Supervisor), Şerif Aziz Şimşir, Saadettin Haluk Çiftçi (Gebze Teknik Üni.), İpek Gürsel Tarkı (Kadir Has Üni.)

Date &Time: May,04th, 2015 – 10:00

Place: 1103

Abstract

In this thesis, I first investigate the widespread methods used in antitrust investigations in the hospital markets. Then, pointing out their ineffectiveness in convincing the courts, I offer a metric called “competitive pressure rate” which is based on Google Maps travel time data as an alternative approach to market definition. I test the effects of the new metric on market prices by an OLS estimation applied to the data from California Office of Health Planning and Development. I provide strong evidence for the existence of correlation between geographic clustering of general acute care hospitals and hospital charges. In particular, I show that a one-unit increase in the competitive pressure rate for normal newborn services would have resulted in a price decrease of 0.71% in 2010 and 0.52% in 2012. This corresponds to annual savings of $9,448,000 in 2010 and $7,582,000 in 2012.