The Impact of Reference Pricing on Hospital-Insurer Bargaining

Building on prior work by this team showing that patients respond to reference pricing by seeking care from lower-priced providers, this study will investigate whether these demand shifts impact the process and outcomes of price negotiations between hospitals and insurers. Empirical game theory will be used to model the negotiating process and those results will be used to estimate the price outcomes of alternative specifications of reference pricing and other consumer-driven strategies such as high deductibles and narrow networks. Findings will add information about how innovative benefit designs stressing consumer incentives could also spur provider price competition.