TY  - JOUR
AU  - Gowrisankaran, Gautam
AU  - Nevo, Aviv
AU  - Town, Robert
TI  - Mergers When Prices are Negotiated: Evidence from the Hospital Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18875
PY  - 2013
Y2  - March 2013
DO  - 10.3386/w18875
UR  - http://www.nber.org/papers/w18875
L1  - http://www.nber.org/papers/w18875.pdf
N1  - Author contact info:
Gautam Gowrisankaran
Department of Economics
University of Arizona
P.O. Box 210108
Tucson, AZ 85721-0108
Tel: 520/621-2529
Fax: 520/621-8450
E-Mail: gowrisankaran@eller.arizona.edu

Aviv Nevo
Department of Economics
The Ronald O. Perelman Center
for Political Science and Economics
133 South 36th Street, Room 617
Philadelphia, PA 19104
E-Mail: anevo@wharton.upenn.edu

Robert Town
Department of Economics
The University of Texas at Austin
2225 Speedway
BRB 1.116, C3100
Austin, TX 78712
Tel: 512/475-8542
E-Mail: robert.town@austin.utexas.edu
M2  - featured in NBER digest on 2013-07-31
AB  - 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.
ER  -