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Mergers When Prices Are Negotiated: Evidence from the Hospital Industry
Abstract
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 toward cheaper hospitals. We show that increasing patient coinsurance tenfold would reduce prices by 16 percent. 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. (JEL C78, G34, I11, I13, L13)
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Cited by
The Industrial Organization of Health-Care Markets
Gaynor, M., Ho, K., & Town, R. J. (2015) · Journal of Economic Literature · doi:10.1257/jel.53.2.235 · Cited by 349
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Grennan, M. (2013) · American Economic Review · doi:10.1257/aer.103.1.145 · Cited by 323
Insurer Competition in Health Care Markets
Ho, K., & Lee, R. (2013) · Econometrica · doi:10.3386/w19401 · Cited by 296
Do increasing markups matter? Lessons from empirical industrial organization
Berry, S., Gaynor, M., & Morton, F. S. (2019) · Journal of Economic Perspectives · doi:10.1257/jep.33.3.44 · Cited by 235
Quantitative Analysis of Multi-Party Tariff Negotiations
Bagwell, K., Staiger, R., & Yurukoglu, A. (2018) · doi:10.3386/w24273 · Cited by 28
Metadata
- Authors
- Gowrisankaran, G., Nevo, A., & Town, R.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2015-01-01
- Volume
- 105
- Issue
- 1
- Pages
- 172-203
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W2098113104
- Cited by
- 393
- References
- 0
- FWCI
- 87.29
- Type
- journal article
- Language
- en
- Open access
- closed
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