The effects of market structure and bargaining position on hospital prices

Melnick, Glenn; Zwanziger, Jack; Bamezai, Anil; Pattison, Robert R.

doi:10.1016/0167-6296(92)90001-h

Cited by 218 publications

(183 citation statements)

References 8 publications

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“…Significant effects of many market structure indicators have been found in the study of Melnick et al (1992), which results lend support to the hypotheses expressed above. The authors investigate prices obtained in different types of markets by the largest PPO in California.…”

Section: Literature Reviewsupporting

confidence: 76%

“…Staten et al (1988) evaluated the effects of the market structure of the hospital market and insurer market share on the discounts offered by hospitals to gain acceptance into the Blue Cross PPO in Indiana and found that the discount was positively related to the number of competing hospitals (as one would expect), but negatively related to the Blue Cross share of hospital revenue. Since the analysis of Staten focused on the period when Blue Cross just made the transition into a PPO plan, Melnick et al (1992) attributed the second result to the relative inexperience with selective contracting of the newly formed Blue Cross Indiana PPO. Bamezai et al (2003), who used a probit model to analyze the contracting data of California's Medicaid program (Medi-Cal), found no evidence in favor of the hypothesis that a large payer (the insurer) was better able to exercise market power, while they found a significant effect of the number of competitors in the hospital market.…”

Section: Literature Reviewmentioning

confidence: 99%

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Market Share and Price in Dutch Home Care: Market Power or Quality?

2010

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SummaryThe paper uses unique data on contracts concluded by providers of home care to evaluate the effect of provider market power on prices of home care services in the Netherlands. Since, at least in some regions, one or two providers dominate the market, there are concerns about the effect of providers' market power on the pricing of home care services. Using data on contracted prices and quantities for 2004-2006, we find that providers with a larger market share are able to contract at a higher price. The effect remains after controlling for quality.

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Section: Literature Reviewsupporting

confidence: 76%

Section: Literature Reviewmentioning

confidence: 99%

Market Share and Price in Dutch Home Care: Market Power or Quality?

2010

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“…Several other characteristics of managed care plan and hospital markets affect plan-provider negotiations, and ultimately hospital prices (Melnick et al 1992). First, the larger the percent of a hospital's total patient days accounted for by a plan, the greater the leverage the plan has with the hospital.…”

Section: Introductionmentioning

confidence: 99%

Hospitals' Negotiating Leverage with Health Plans: How and Why Has It Changed?

Devers

Casalino²,

Rudell³

et al. 2003

Health Services Research

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Objective. To describe how hospitals' negotiating leverage with managed care plans changed from 1996 to 2001 and to identify factors that explain any changes. Data Sources. Primary semistructured interviews, and secondary qualitative (e.g., newspaper articles) and quantitative (i.e., InterStudy, American Hospital Association) data. Study Design. The Community Tracking Study site visits to a nationally representative sample of 12 communities with more than 200,000 people. These 12 markets have been studied since 1996 using a variety of primary and secondary data sources. Data Collection Methods. Semistructured interviews were conducted with a purposive sample of individuals from hospitals, health plans, and knowledgeable market observers. Secondary quantitative data on the 12 markets was also obtained. Principal Findings. Our findings suggest that many hospitals' negotiating leverage significantly increased after years of decline. Today, many hospitals are viewed as having the greatest leverage in local markets. Changes in three areas--the policy and purchasing context, managed care plan market, and hospital market--appear to explain why hospitals' leverage increased, particularly over the last two years (2000)(2001). Conclusions. Hospitals' increased negotiating leverage contributed to higher payment rates, which in turn are likely to increase managed care plan premiums. This trend raises challenging issues for policymakers, purchasers, plans, and consumers.

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“…The debate has one side claiming that lower costs associated with managed care are the outcome of quality degradation, while the other side claims that lower costs are due to the ability of managed care organizations to obtain lower prices from providers. The existing evidence favours the latter interpretation over the former (see, among others, Cuellar and Gertler, 2006;Cutler et al, 2000;Ho, 2004;Maude-Griffin et al, 2001, Melnick et al, 1992Sieg (2000)). …”

Section: Evidence On Bargaining Outcomesmentioning

confidence: 96%

Models of Negotiation and Bargaining in Health Care

Barros¹,

Martínez-Giralt²

2012

The Elgar Companion to Health Economics, Second Edition

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IntroductionUnder traditional health insurance arrangements, citizens were covered by some insurance scheme. When sick, insurance arrangements allowed citizens to go to a health care provider, pay the price of the care received and be reimbursed later. Alternatively, the care provider would be owned by the insurer (like in integrated national health systems) and the patient paid nothing at the moment of consumption. In such arrangements, providers would freely set their prices or have no price to set at all (in an NHS-like system).Recent developments in health care financing include independent institutions that negotiate the prices with the financing institution. This is true with respect to health maintenance organizations (HMOs), managed care in general, but also in national health systems where decentralization and the split between provision and financing is implemented.In this scenario, negotiation over contractual terms, including prices as one major element, becomes a relevant issue in the analysis of performance of health care systems. Both empirical and theoretical analyses have been produced, and are reviewed below.This chapter reflects our views and preferences. It does not aim to be an encyclopaedic view of the existing literature on bargaining in health care. Instead, we try to highlight the new developments associated with explicit bargaining between third-party payers and providers of health care (a relation which is, in itself, only one of many that exist in the health care sector).Bargaining theory has a long tradition in the economics literature. However, it is only recently that this approach has found space in the analysis of the health care sector. The recognition of the strategic interaction among agents in the health care sector (patients, providers and third-party payers) came with the application of models borrowed from the industrial organization tradition dating from the 1970s. It was in the early 1990s when a step forward was taken with the eruption of the models of bargaining (see for example, Osborne and Rubinstein, 1990, for a nice presentation) In many situations the health care sector has the structure of a bilateral monopoly/oligopoly. In this context, bargaining becomes the natural way to approach the interactions among agents.Most economic analyses of contract design in health care in fact assume that the party that moves first, typically the payer, proposes a take-it-or-leave-it offer to the provider. We take here a broader view, looking at other types of negotiation procedures. We do not discuss issues related to contract design, which are taken up in chapter 22 by Chalkley in this Companion.We focus here on models of explicit bargaining between two parties, which we call the payer and the provider. On theoretical grounds, simple bargaining models can have their results transposed in a straightforward way: higher bargaining power and higher

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The effects of market structure and bargaining position on hospital prices

Cited by 218 publications

References 8 publications

Market Share and Price in Dutch Home Care: Market Power or Quality?

Market Share and Price in Dutch Home Care: Market Power or Quality?

Hospitals' Negotiating Leverage with Health Plans: How and Why Has It Changed?

Models of Negotiation and Bargaining in Health Care

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