Working Paper: NBER ID: w22039
Authors: Matthew Grennan; Ashley Swanson
Abstract: Using a detailed dataset of hospitals' purchase orders, we find that information on purchasing by peer hospitals leads to reductions in the prices hospitals negotiate for supplies. Identification is based on staggered access to information across hospitals over time. Within coronary stents, reductions are concentrated among hospitals previously paying relatively high prices and for brands purchased in large volumes, and are consistent with resolving asymmetric information problems. Estimates across a large number of other important product categories indicate that the effects of information are largest in both absolute and relative terms for physician preference items (PPIs). Among PPIs, high-price, high-quantity hospital-brand combinations average 3.9 percent savings, versus 1.6 percent for commodities.
Keywords: transparency; hospital supply purchasing; benchmarking information; negotiated prices
JEL Codes: D40; D82; D83; I11; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Access to benchmarking information (C82) | Reduction in uncertainty in negotiations (D80) |
| Access to benchmarking information (C82) | Reduction in prices negotiated by hospitals (L42) |
| Access to benchmarking information (C82) | Larger effects for hospitals in the top quintile of the price distribution (I11) |
| Access to benchmarking information (C82) | Price reductions are more pronounced for high-volume purchases (L42) |
| Access to benchmarking information (C82) | Average savings for physician preference items (PPIs) (I11) |