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Questions: Health insurers contract with hospital/health systems to provide reimbursement for patients' healthcare costs and to ensure that affiliated physicians are "in-network". Health insurers want to have services available to their insured population, but at low prices. Suppose BCBS is negotiating with Indian Path Medical Center and Wellmont Medical Center, the only two hospitals in a region, for reimbursements and inclusion in their network. The value of having one hospital "in-network" is $90M, and the value of having a second hospital "in-network" is an additional $30M. (Please give me proposed dollar amounts!)
A. What's the likely bargaining negotiation outcome if BCBS bargains by telling each hospital that they are going to reach agreement with the other hospital?
B. Suppose the two hospitals merge (currently proposed - Wellmont/Mountain States!). Now, what is the likely post-merger bargaining outcome?
C. BCBS is nervous about the hospitals merging - and so believes that if no favorable agreement can be reached with the merged facilities, it can draw $30M in patients to an already contracted hospital only ~1 hour away (Morristown-Hamblen). What is the outcome now?
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