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Transparency and negotiated prices: the value of information in hospital-supplier bargaining
Transparency and negotiated prices: the value of information in hospital-supplier bargaining
- Collection:
- Health Policy and Services Research
- Series Title(s):
- Research brief (Leonard Davis Institute of Health Economics)
- Author(s):
- Grennan, Matthew, author
Swanson, Ashley, author - Contributor(s):
- Leonard Davis Institute of Health Economics, issuing body.
- Publication:
- Philadelphia, PA : Leonard Davis Institute of Health Economics, 2016
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Benchmarking -- economics
Economics, Hospital
Equipment and Supplies, Hospital -- economics
Negotiating
Purchasing, Hospital -- economics
United States - Genre(s):
- Technical Report
- Abstract:
- KEY FINDINGS: Hospitals that join a pricing database are able to reduce the negotiated prices they pay to medical technology companies. Reductions are concentrated among hospitals previously paying high prices relative to other hospitals and for products purchased in relatively large volumes. Transparency may offer significant savings on medical devices. THE QUESTION. How does price transparency affect negotiated prices in business-to-business markets? In the first empirical analysis of its kind, LDI Senior Fellows Ashley Swanson and Matthew Grennan estimate how benchmarking information could be useful to hospital buyers in their negotiations with medical technology companies. They explore two mechanisms for possible savings: first, by reducing "asymmetric information" about seller bargaining parameters (that is, not knowing the lowest price a seller would accept); and second, by helping hospitals solve the "agency problem" with their procurement negotiators (that is, allowing hospitals to monitor negotiator performance and restructure financial incentives). Taking coronary stents as their example, the authors look at whether hospitals that join a price benchmarking database, which contains average pricing based on data submitted by member hospitals, can achieve savings in future negotiations with suppliers. National Bureau of Economic Research, Working Paper No. 22039, February 2016.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
- Extent:
- 1 online resource (1 PDF file (2 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101679520 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101679520