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Managed care's price bargaining with hospitals

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  • Wu, Vivian Y.

Abstract

Research has shown that managed care (MC) slowed the rate of growth in health care spending in the 1990s, primarily via lower unit prices paid. However, the mechanism of MC's price bargaining has not been well studied. This article uses a unique panel dataset with actual hospital prices in Massachusetts between 1994 and 2000 to examine the sources of MC's bargaining power. I find two significant determinants of price discounts. First, plans with large memberships are able to extract volume discounts across hospitals. Second, health plans that are more successful at channeling patients can extract greater discounts. Patient channeling can add to the volume discount that plans negotiate.

Suggested Citation

  • Wu, Vivian Y., 2009. "Managed care's price bargaining with hospitals," Journal of Health Economics, Elsevier, vol. 28(2), pages 350-360, March.
    • Handle: RePEc:eee:jhecon:v:28:y:2009:i:2:p:350-360
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    5. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
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    7. Evelien Bergrath & Milena Pavlova & Wim Groot, 2014. "Attracting Health Insurance Buyers through Selective Contracting: Results of a Discrete-Choice Experiment among Users of Hospital Services in the Netherlands," Risks, MDPI, vol. 2(2), pages 1-25, April.
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