Managed care's price bargaining with hospitals.
Research has shown that managed care (MC) slowed the rate of growth in health care spending in the 1990s, primarily via lower unit prices paid. However, the mechanism of MC's price bargaining has not been well studied. This article uses a unique panel dataset with actual hospital prices in Massachusetts between 1994 and 2000 to examine the sources of MC's bargaining power. I find two significant determinants of price discounts. First, plans with large memberships are able to extract volume discounts across hospitals. Second, health plans that are more successful at channeling patients can extract greater discounts. Patient channeling can add to the volume discount that plans negotiate.
Wu
Vivian Y
VY
University of Southern California and RAND Corporation, Los Angeles, CA 90089, United States. vivianwu@usc.edu
D000328:Adult; D004469:Economics, Hospital / Q000458:organization & administration*; D005260:Female; D006801:Humans; D007349:Insurance, Health, Reimbursement / Q000191:economics*; D008297:Male; D008329:Managed Care Programs; D008404:Massachusetts; D008875:Middle Aged; D017059:Models, Econometric; D017008:Negotiating; D055815:Young Adult