Health Law Case Solution
The rural hospital markets are characterized by a small number of healthcare providers as well as disproportionately scarcer resources, due to which the merger would hinder the differentiation capabilities of both healthcare providers based on innovation and technological advancement. Not only this, the competition in the healthcare sector, strengthens the patients’ choice, improves the quality, stimulates the innovation as well as the technological advancement, controls the costs and enhances the-efficiency(Pedro Pita Barros, 2016). If the hospitals do not compete with each other in the rural areas to attract the patients; the attention to patient comfort or even the medical care standard would suffer.
Thus, keeping in mind the adverse effects of the reduced competition led by the merger between a large community hospital and a small competitor as well as an increased need of providing healthcare choices to the people in rural areas;the-large community hospital is not recommended to merge with a small competitor.
Pros and cons of legality of merger between companies
Advantages
Mergers have become foremost and dominant modes of growth for the organizations which seek for the competitive edge, in an increasingly complex and global business. The merger allow the companies to accelerate the growth of business. Together, two competitors combine to form the largest healthcare system that serves the maximum number of patients and generates an enormous amount of return. Furthermore, the cost saving from merger comes either from an ability to share best practices and expertise across system hospitals or from an elimination of duplicative costs. A merger tends to provide financial oversight as well as the strategic direction to the combined firms(Goddard, 2018).
Disadvantages
In contradiction to the benefits of the merger;the legality of the possible merger between two hospitals argues that the merger is one of the ways of reducing the extent of competition in the healthcare industry, which in turn disrupts the innovation and restricts the ability of the healthcare providers to strengthen the patient’s choice. The disappearance of the competition in the healthcare sector tends to create-monopoly in the rural market. Combining the two firms with strong capabilities to successfully innovate in the specific direction, hinders the innovation in the market.
Hence, the disadvantages of the merger outweigh the-advantages in a way that the merger between the companies tend to result in greater inefficiencies and reduction of the merged firms’ capabilities as well as incentives to compete.Moreover, the merger leads towards an-increased average price of hospital services, less choices available to the consumers, higher health insurance premiums , limited patient benefits, dis-economies of scale and no measured impact on quality......................
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