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Full-Text Articles in Industrial Organization
Bargaining In Hospital Merger Models, David J. Balan, Keith Brand
Bargaining In Hospital Merger Models, David J. Balan, Keith Brand
David J. Balan
Hospital prices for commercially-insured patients are generally set through bilateral negotiations with health insurance companies. Reflecting common industry practice, contemporary models of hospital/health insurer bargaining usually assume that multi-hospital systems bargain on an all-or-nothing basis. However, hospitals within systems may bargain separately, and a commitment to do so is sometimes put forward as a remedy for an otherwise anticompetitive merger. We analyze and compare the merger-induced changes in equilibrium prices in a Nash Bargaining framework under these two modes of bargaining. We show that, while the magnitude of price effects under either mode depends critically on the degree of pre-merger …