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

88 Pages Posted: 24 Mar 2016 Last revised: 20 Feb 2019

See all articles by Ashley Swanson

Ashley Swanson

University of Pennsylvania - The Wharton School; NBER

Matthew Grennan

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

Multiple version iconThere are 2 versions of this paper

Date Written: February 1, 2019

Abstract

Using data on hospitals’ purchases across a large number of important product categories, we find that access to information on purchasing by peer hospitals leads to reductions in the prices hospitals negotiate for supplies. These effects are concentrated among hospitals previously paying relatively high prices for brands purchased in large volumes. Evidence from coronary stents suggests that transparency allows hospitals to resolve asymmetric information problems, but savings are limited in part by the stickiness of contracts in business-to-business settings. Savings are largest for physician preference items, where high-price, high-quantity hospital-brand combinations average 3.9 percent savings, versus 1.6 percent for commodities.

Suggested Citation

Swanson, Ashley and Grennan, Matthew, Transparency and Negotiated Prices: The Value of Information in Hospital-Supplier Bargaining (February 1, 2019). The Wharton School Research Paper No. 88. Available at SSRN: https://ssrn.com/abstract=2753161

Ashley Swanson (Contact Author)

University of Pennsylvania - The Wharton School ( email )

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NBER ( email )

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Matthew Grennan

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
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Philadelphia, PA 19104
United States

HOME PAGE: http://www.wharton.upenn.edu/faculty/grennan.cfm

National Bureau of Economic Research (NBER) ( email )

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United States

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