Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining

75 Pages Posted: 1 Mar 2016

See all articles by Matthew Grennan

Matthew Grennan

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER)

Ashley Swanson

Columbia University - Columbia Business School; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: February 2016

Abstract

Using a detailed dataset of hospitals' purchase orders, we find that information on purchasing by peer hospitals leads to reductions in the prices hospitals negotiate for supplies. Identification is based on staggered access to information across hospitals over time. Within coronary stents, reductions are concentrated among hospitals previously paying relatively high prices and for brands purchased in large volumes, and are consistent with resolving asymmetric information problems. Estimates across a large number of other important product categories indicate that the effects of information are largest in both absolute and relative terms for physician preference items (PPIs). Among PPIs, high-price, high-quantity hospital-brand combinations average 3.9 percent savings, versus 1.6 percent for commodities.

Suggested Citation

Grennan, Matthew and Swanson, Ashley, Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining (February 2016). NBER Working Paper No. w22039, Available at SSRN: https://ssrn.com/abstract=2739564

Matthew Grennan (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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National Bureau of Economic Research (NBER) ( email )

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Ashley Swanson

Columbia University - Columbia Business School ( email )

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NBER ( email )

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