Debt and Bargaining Outcomes: Evidence from U.S. Hospitals

48 Pages Posted: 2 May 2015 Last revised: 18 Sep 2016

See all articles by Mitch Towner

Mitch Towner

University of Arizona - Department of Finance

Date Written: September 17, 2016

Abstract

This paper uses the health care industry as a novel laboratory in which to study a firm's strategic use of debt to enhance its bargaining power during negotiations with non-financial stakeholders. I show that reimbursement rates negotiated between a hospital and insurers for a specific procedure are higher when the hospital has more debt. I show that this effect is stronger when hospitals have less bargaining power relative to insurers ex ante. The contribution of this paper is to provide direct evidence that debt improves a firm's bargaining outcomes.

Keywords: Capital Structure, Bargaining, Stakeholders, Debt, Leverage, Healthcare, Market Competition

JEL Classification: G30, G32, G33

Suggested Citation

Towner, Mitch, Debt and Bargaining Outcomes: Evidence from U.S. Hospitals (September 17, 2016). Available at SSRN: https://ssrn.com/abstract=2600660 or http://dx.doi.org/10.2139/ssrn.2600660

Mitch Towner (Contact Author)

University of Arizona - Department of Finance ( email )

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