How to Get Away With Merger: Stealth Consolidation and its Real Effects on US Healthcare

Most US mergers are not reported to the federal government on the basis of their size. This can effectively exempt them from antitrust scrutiny, resulting in mergers to monopoly and duopoly, even in industries where enforcement is otherwise robust. This paper studies the impact of premerger notification exemptions in the context of US dialysis providers. First, I find large effects on enforcement. For instance, many proposed dialysis facility acquisitions that would otherwise be blocked over 95% of the time are blocked less than 5% of the time when exempt from premerger notification requirements. Second, I find equally important effects on market structure. Exempt facility acquisitions account for most of the rise in industry-wide within-market concentration over the last two decades. In fact, applying the enforcement rates faced by reportable mergers to exempt mergers stalls the dramatic consolidation of the dialysis industry. Finally, facility acquisitions associated with exempt mergers compromise the quality of care received by patients.