How to Get Away with Merger: Stealth Consolidation and Its Effects on US Healthcare

Most US mergers are not reported to the government on the basis of their size, which can effectively exempt them from antitrust scrutiny, thereby leading to anticompetitive behavior. This paper studies premerger notification exemptions in the US dialysis industry. Over two decades, dialysis providers attempted over 4,000 facility acquisitions, half of which were not reported to the nation’s competition authorities. I estimate the effect of premerger notification exemptions on antitrust enforcement rates, and then I estimate the impact of the resulting market structure changes on patient health outcomes. First, I find that exemptions severely limit enforcement. Most striking, proposed facility acquisitions that would result in monopoly are blocked more than 80% of the time when apart of reportable mergers but less than 2% of the time when apart of exempt ones. Second, I find that the resulting market structure changes reduce the quality of care, evidenced by higher hospitalization rates and lower survival rates.