AHA Rebuttal to “Employer Consolidation and Wages: Evidence from Hospitals”

A recent American Economic Review article provides an outdated and recycled take on the effect of hospital consolidation on wages. The article first appeared as a working paper several years ago. At that time, the AHA expressed concern about the lack of rigor and assumptions used in the analysis. We also noted its overly narrow focus on wages rather than total compensation and opportunities for advancement in a larger system. Disappointingly, the article remains largely the same, including its trivial sample size and non-generalizable conclusions. 

To start, we are still concerned that the study’s methodology was oversimplified. The authors argue that skilled hospital workers (excluding nurses, pharmacists, and physicians) have no other market but hospitals. But the authors excluded key personnel from this category. In fact, skilled workers are largely in administrative roles such as bookkeeping or accounting, and many non-clinician staff have skills that are readily transferrable to other fields. Further, local and specialty-specific shortages of both physicians and nurses are common and projected to worsen over the next decade. This means hospitals and health systems are now competing to attract physicians and staff in their local communities as well as nationally. 

Moreover, the authors repeat the same mistake from the previous version of over-simplifying total compensation. They again overlooked a number of other benefits that hospitals and health systems offer their employees: retirement plan contributions, life and other insurance coverages, subsidized child care, and tuition reimbursement, to name just a few. Their self-described “back of the envelope” calculation of health insurance costs is convoluted and confusing at best. Given this limitation, the analysis fails to answer the question of whether employees are better or worse off following a merger or acquisition. 

It is disconcerting to see hospital critics breathe new life into old studies. Some erroneously view this study as new evidence. In fact, it is a reuse of the same underlying working paper published in another outlet. 

Hospitals and health systems’ have risen to meet the challenge of COVID-19 head-on, and their contribution to their communities has never been greater. While they have provided care for the millions of patients with COVID-19 infections, they have done so while facing historic financial challenges. As we emerge from an international epidemic, we should be focusing on how to repair the damage done to hospitals and health systems and the communities they serve, not creating more hurdles to enabling hospitals to form the kind of affiliations that will allow them to continue to provide care well into the future.  

Melinda Hatton is AHA’s General Counsel.