Mergers When Prices are Negotiated: Evidence from the Hospital Industry
We estimate a bargaining model of competition between hospitals and managed care organizations (MCOs) and use the estimates to evaluate the effects of hospital mergers. We find that MCO bargaining restrains hospital prices significantly. The model demonstrates the potential impact of coinsurance rates, which allow MCOs to partly steer patients towards cheaper hospitals. We show that increasing patient coinsurance tenfold would reduce prices by 16%. We find that a proposed hospital acquisition in Northern Virginia that was challenged by the Federal Trade Commission would have significantly raised hospital prices. Remedies based on separate bargaining do not alleviate the price increases.
|Date of creation:||Mar 2013|
|Publication status:||published as Gowrisankaran, Gautam, Aviv Nevo, and Robert Town. 2015. "Mergers When Prices Are Negotiated: Evidence from the Hospital Industry." American Economic Review, 105(1): 172-203.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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