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

Abstract: This paper empirically analyzes the effects of increasing access to price information in markets for hospitals' supplies. Hospital supplies account for a large percentage of both the level and growth of health expenditures, and prices for the same input can vary dramatically across hospitals. This variation has prompted calls for increased transparency; such calls have encountered strong opposition from supply manufacturers, particularly those selling medical devices. Using a new data set on all purchase orders issued by over 10 percent of US hospitals over 2009-13 (more than 1.9 million distinct products in 2,765 different product categories), we find that exogenous increases in access to price information led to large reductions in hospital prices, concentrated in the upper part of the price distribution.