International Journal of Health Care Finance and Economics

, 8:1

First online:

Open Access This content is freely available online to anyone, anywhere at any time.

Do health insurers possess monopsony power in the hospital services industry?

  • Laurie J. BatesAffiliated withDepartment of Economics, Bryant University
  • , Rexford E. SanterreAffiliated withDepartment of Finance, School of Business, University of Connecticut Email author 


This paper uses metropolitan data to test empirically if health insurers possess monopsony or monopoly-busting power on the buyer-side of the hospital services market. According to theory, monopsony power is indicated by a fall in output, whereas, monopoly-busting power is shown by an increase in output when buyer concentration rises. The empirical results provide evidence that greater health insurer buyer concentration is not associated with monopsony power. Instead, some evidence is found to suggest that higher health insurer concentration translates into increased monopoly-busting power. That is, metropolitan hospitals offer increased services when the buyer-side of the hospitals services market is more highly concentrated.


Monopsony Managed care Hospital utilization