HOSPITAL-INSURER BARGAINING - AN EMPIRICAL-INVESTIGATION OF APPENDECTOMY PRICING

Employers' increased sensitivity to health care costs has forced insur ers to seek ways to lower costs through effective bargaining with prov iders. What factors determine the prices negotiated between hospitals and insurers? The hospital-insurer interaction is captured in the cont ext of a bargaining model, in which the gains from bargaining are expl icitly defined. Appendectomy was chosen because it is a well-defined p rocedure with little clinical variation. Our results show that certain hospital institutional arrangements (e.g. hospital affiliations), HMO penetration, and greater hospital concentration improve hospitals' ba rgaining position. Furthermore, hospitals' bargaining effectiveness ha s diminished over time and Varies across states. (C) 1997 Elsevier Sci ence B.V.