Antitrust and competitive issues are intertwined with efforts to control health care costs. Whether hospital competition holds down costs is an issue of much controversy and is the topic of this article. The findings are consistent with the hypothesis that hospitals compete primarily on a nonprice basis. This suggests that a more flexible application of antitrust policy to hospital mergers will reduce cost increases and will improve efficiency. A step in this direction may be necessary if the managed care plans discussed by the Clinton administration create highly concentrated provider networks.