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Insurer-hospital bargaining: negotiated discounts in post-deregulation connecticut

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  • Alan T. Sorensen

Abstract

This paper uses unique data from the state of Connecticut to examine discounting patterns in the state's hospital industry for the years following deregulation (1995-1998). The data provide a rare opportunity to study payer-level differences in negotiated discounts for hospital services. In addition to presenting descriptive evidence on how discounts vary across payers, payer types and hospital types, this study uses matched revenue data to analyze and empirically estimate the economic determinants of discount magnitudes. Payer size appears to affect bargaining power, but the economic significance of the effect is small. Much larger than the effect of payer size is the influence of payers' abilities to 'move market share' by channeling patients to hospitals with which favorable discounts have been negotiated. Copyright Blackwell Publishing Ltd. 2003.

Suggested Citation

  • Alan T. Sorensen, 2003. "Insurer-hospital bargaining: negotiated discounts in post-deregulation connecticut," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 469-490, December.
  • Handle: RePEc:bla:jindec:v:51:y:2003:i:4:p:469-490
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    References listed on IDEAS

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    Cited by:

    1. Gautam Gowrisankaran & Aviv Nevo & Robert Town, 2015. "Mergers When Prices Are Negotiated: Evidence from the Hospital Industry," American Economic Review, American Economic Association, vol. 105(1), pages 172-203, January.
    2. Abe Dunn, 2014. "Health Insurance and the Demand for Medical Care: Instrumental Variable Estimates Using Health Insurer Claims Data," BEA Working Papers 0107, Bureau of Economic Analysis.
    3. Raventós, Pedro & Zolezzi, Sandro, 2015. "Electronic tendering of pharmaceuticals and medical devices in Chile," Journal of Business Research, Elsevier, vol. 68(12), pages 2569-2578.
    4. Pelech, Daria, 2017. "Dropped out or pushed out? Insurance market exit and provider market power in Medicare Advantage," Journal of Health Economics, Elsevier, vol. 51(C), pages 98-112.
    5. Wu, Vivian Y., 2009. "Managed care's price bargaining with hospitals," Journal of Health Economics, Elsevier, vol. 28(2), pages 350-360, March.
    6. Stéphanie A. Geest & Marco Varkevisser, 2016. "Using the deductible for patient channeling: did preferred providers gain patient volume?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(5), pages 645-652, June.
    7. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, Elsevier.
    8. David Bardey & Giancarlo Buitrago, 2015. "Integración vertical en el sector de la salud colombiano," DOCUMENTOS CEDE 014069, UNIVERSIDAD DE LOS ANDES-CEDE.
    9. Boone, J. & Douven, R.C.M.H. & Droge, C. & Mosca, I., 2010. "Health Insurance Competition : The Effect of Group Contracts," Discussion Paper 2010-55, Tilburg University, Center for Economic Research.
    10. Ethan M. J. Lieber, 2017. "Does It Pay to Know Prices in Health Care?," American Economic Journal: Economic Policy, American Economic Association, vol. 9(1), pages 154-179, February.
    11. Abe Dunn & Adam Hale Shapiro, 2014. "Do Physicians Possess Market Power?," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 159-193.
    12. Kai Hüschelrath & Tobias Veith, 2016. "Cartelization, Cartel Breakdown, and Price Behavior: Evidence from the German Cement Industry," Journal of Industry, Competition and Trade, Springer, vol. 16(1), pages 81-100, March.
    13. Bokhari, Farasat A.S., 2009. "Managed care competition and the adoption of hospital technology: The case of cardiac catheterization," International Journal of Industrial Organization, Elsevier, vol. 27(2), pages 223-237, March.
    14. Dunn, Abe, 2010. "The value of coverage in the medicare advantage insurance market," Journal of Health Economics, Elsevier, vol. 29(6), pages 839-855, December.
    15. Leemore Dafny & Mark Duggan & Subramaniam Ramanarayanan, 2012. "Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry," American Economic Review, American Economic Association, vol. 102(2), pages 1161-1185, April.
    16. Tetteh, Ebenezer kwabena, 2008. "Providing affordable essential medicines to African households: The missing policies and institutions for price containment," Social Science & Medicine, Elsevier, vol. 66(3), pages 569-581, February.
    17. Kate Ho & Ariel Pakes, 2014. "Hospital Choices, Hospital Prices, and Financial Incentives to Physicians," American Economic Review, American Economic Association, vol. 104(12), pages 3841-3884, December.
    18. Kate Ho & Robin S. Lee, 2017. "Insurer Competition in Health Care Markets," Econometrica, Econometric Society, vol. 85, pages 379-417, March.
    19. Lieke H. H. M. Boonen & Frederik T. Schut & Xander Koolman, 2008. "Consumer channeling by health insurers: natural experiments with preferred providers in the Dutch pharmacy market," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 299-316.
    20. ., 2012. "Models of Negotiation and Bargaining in Health Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 21 Edward Elgar Publishing.
    21. Dana, James D., 2012. "Buyer groups as strategic commitments," Games and Economic Behavior, Elsevier, vol. 74(2), pages 470-485.
    22. Dominic Coey, 2013. "Physician Incentives and Treatment Choices in Heart Attack Management," Discussion Papers 12-027, Stanford Institute for Economic Policy Research.
    23. repec:eee:hepoli:v:121:y:2017:i:5:p:504-514 is not listed on IDEAS
    24. repec:wsi:qjfxxx:v:07:y:2017:i:04:n:s2010139217500148 is not listed on IDEAS

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