We investigate the impact of hospital system membership on negotiations between hospitals and managed care organizations (MCOs). Previous research finds that system hospitals secure higher reimbursements by exploiting local market concentration. By leveraging system membership in the bargaining game, however, system hospitals may also extract a higher percentage of their value to an MCO. Our findings reveal that more of the observed price gap between system and nonsystem hospitals can be attributed to bargaining power differences than to differences linked to relative concentration. These results highlight the importance of explicitly modeling the bargaining process when evaluating negotiated-price markets more generally. (JEL C78, I11, I13, L14)
Lewis, Matthew S., and Kevin E. Pflum.
"Diagnosing Hospital System Bargaining Power in Managed Care Networks."
American Economic Journal: Economic Policy,
Bargaining Theory; Matching Theory
Analysis of Health Care Markets
Health Insurance, Public and Private
Transactional Relationships; Contracts and Reputation; Networks