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

88 Pages Posted: 24 Mar 2016 Last revised: 4 Aug 2020

See all articles by Ashley Swanson

Ashley Swanson

Columbia University - Columbia Business School; NBER

Matthew Grennan

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

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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)

Columbia University - Columbia Business School ( email )

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Matthew Grennan

University of Pennsylvania - The Wharton School ( email )

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

National Bureau of Economic Research (NBER) ( email )

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