Negotiation Advantages of Professional Associations in Health Care

• Authors: Pedro Pita Barros and Xavier Martínez-Giralt.
• BSE Working Paper: 81 | September 15
• Keywords: professional association , negotiation , health care
• JEL codes: I11, I18
• professional association
• negotiation
• health care

In several instances, third-party payers negotiate prices of health care services with providers. We show that a third-party payer may prefer to deal with a professional association than with the sub-set constituted by the more efficient providers, and then apply the same price to all providers. The reason for this is the increase in the bargaining position of providers. The more efficient providers are also the ones with higher profits in the event of negotiation failure. This allows them to extract a higher surplus from the third-party payer.