Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets

65 Pages Posted: 6 Aug 2018

See all articles by Kate Ho

Kate Ho

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Robin S. Lee

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2018

Abstract

We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, Nash-in-Nash with Threat of Replacement, that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer-optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer bene fits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.

Suggested Citation

Ho, Kate and Lee, Robin S., Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets (July 2018). CEPR Discussion Paper No. DP13096. Available at SSRN: https://ssrn.com/abstract=3226871

Kate Ho (Contact Author)

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Robin S. Lee

Harvard University - Department of Economics ( email )

1805 Cambridge St.
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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