Physician Prices and Competition: Evidence from Acquisitions in the Private Health Care Sector

Abstract

We consider the effects of mergers and acquisitions for private physicians, who compete for patients on price. To estimate the effects, we use nationwide administrative data on private physicians and the organization of their practice over 10 years in Finland. We show that acquisitions can reduce competition among physicians, leading to higher prices. We estimate the strongest price increase to be in gynecology, in which switching costs and inertia in physician choice may decrease physician competition, at least locally (within a health care unit). The reduction in the number of physicians in a target unit is the key mechanism behind the estimated effect.