Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets

63 Pages Posted: 28 Aug 2017 Last revised: 16 May 2022

See all articles by Kate Ho

Kate Ho

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

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: August 2017

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 benefits 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 Ho, Kate and Lee, Robin S., Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets (August 2017). NBER Working Paper No. w23742, Available at SSRN: https://ssrn.com/abstract=3027846

Kate Ho (Contact Author)

National Bureau of Economic Research (NBER)

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Princeton University - Department of Economics ( email )

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Robin S. Lee

Harvard University - Department of Economics ( email )

1805 Cambridge St.
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER) ( email )

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