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Debt and Bargaining Outcomes: Evidence from U.S. Hospitals

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  • Mitch Towner

    (Eller College of Management, University of Arizona, Tucson, Arizona 85721)

Abstract

Using the healthcare industry as a novel laboratory, I study whether a firm’s use of debt enhances its bargaining power during negotiations with nonfinancial stakeholders. I find that reimbursement rates negotiated between a hospital and insurers for two homogeneous procedures are higher when the hospital has more debt. This relation is stronger among hospitals with less bargaining power relative to insurers ex ante. The evidence is consistent with the idea that debt improves a firm’s bargaining power.

Suggested Citation

  • Mitch Towner, 2020. "Debt and Bargaining Outcomes: Evidence from U.S. Hospitals," Management Science, INFORMS, vol. 66(5), pages 2083-2098, May.
    • Handle: RePEc:inm:ormnsc:v:66:y:2020:i:5:p:2083-2098
    DOI: 10.1287/mnsc.2019.3291
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