NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Insurer Competition and Negotiated Hospital Prices

Kate Ho, Robin S. Lee

NBER Working Paper No. 19401
Issued in September 2013
NBER Program(s):   HC   IO

We measure the impact of increased health insurer competition on negotiated hospital prices using detailed 2004 California claims data. We develop a theoretical bargaining model to moti­vate our empirical analysis, and use the competitiveness of Kaiser Permanente, a large vertically integrated insurer, in a hospital’s market as a measure of insurer competition. We find that in­creasing competition reduces hospital prices on average, but that the most attractive hospitals can leverage increased competition to negotiate higher rates. This bargaining effect creates in­centives for further hospital consolidation and implies that hospital market power can impact prices even in markets with many insurers.

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This paper was revised on December 18, 2013

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19401

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