Insurer Competition and Negotiated Hospital Prices
AbstractWe measure the impact of increased health insurer competition on negotiated hospital prices using detailed 2004 California claims data. We develop a theoretical bargaining model to motivate our empirical analysis, and use the competitiveness of Kaiser Permanente, a large vertically integrated insurer, in a hospital’s market as a measure of insurer competition. We find that increasing competition reduces hospital prices on average, but that the most attractive hospitals can leverage increased competition to negotiate higher rates. This bargaining effect creates incentives for further hospital consolidation and implies that hospital market power can impact prices even in markets with many insurers.
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Date of creation: Sep 2013
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Find related papers by JEL classification:
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-24 (All new papers)
- NEP-COM-2013-09-24 (Industrial Competition)
- NEP-HEA-2013-09-24 (Health Economics)
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