Driving a Bargain: Negotiation Skill and Price Dispersion

Kristine Hankins, Tong Liu, Denis Sosyura

We show that individual negotiation skills affect equilibrium prices in societally important contracting. We develop a novel measure of managers’ negotiation skills from private vehicle transactions and link it to proprietary data on negotiated hospital prices. Higher-skilled managers negotiate better prices, suggesting negotiation skill is a portable asset. Management turnovers and shocks to insurer bargaining positions support this interpretation. We estimate a model to quantify the role of individual skill and find heterogeneity in negotiation skills explains 37% of the price dispersion attributed to differences in hospitals’ bargaining power. Overall, human capital is an important determinant of market-wide price dispersion.

Embargoed Disclosure

Yue Chen, Sean Wang, Yue Zhang

Clinical trial disclosures play a key role in communicating firms’ R&D outcomes. These trials assess the safety and efficacy of new drug candidates, and their results ultimately determine prospects for regulatory approval and commercialization. To enhance credibility, firms often outsource third-party principal investigators (PIs) to conduct trials, with results disclosed through peer-reviewed publications. To maintain control over both the timing and content of this key disclosure, firms sometimes impose embargo clauses—contractual terms that require PIs to submit manuscripts for sponsor review and allow the sponsor to delay publication. We link U.S. clinical trials to their associated publications to examine whether embargo clauses allow sponsoring firms to influence disclosure timing and content. We present several findings. First, embargo clauses are more common in trials with higher reputational or regulatory stakes. Second, by tracking changes across archived versions of trial protocols, we show that embargoed trials are more likely to modify pre-specified primary endpoints. Third, a histogram of p-values shows that embargoed trials are more likely to report results with p ≤ 0.01, consistent with selective reporting. Fourth, abstracts of embargoed publications exhibit greater levels of “spin,” with more positive framing in conclusions relative to results. Finally, embargoed trials take longer to reach publication, delaying when the scientific community can access trial results. Our findings show how embargo clauses shape the timing, framing, and perceived strength of third-party disclosures in high-stakes innovation settings, with implications for public health transparency and scientific integrity.

Hidden Medical Debt and Consumer Access to Credit

Elena Loutskina, Joonsung Won

Credit bureaus face significant frictions in collecting consumer medical debt liabilities data, which spurred an intense ongoing policy debate. Leveraging novel healthcare costs proxies based on Medicare spending data, we evaluate the impact of hidden medical liabilities on consumer credit scoring and access to credit. We document that the traditional creditworthiness measures underestimate the ex-post default for consumers residing in higher healthcare costs markets. Consumers in high-healthcare-cost CBSAs are 37.6% more likely to default than those in low-healthcare-cost CBSAs. These effects are more pronounced among higher risk consumers, those with low credit scores and high DTIs. Lenders internalize these biases and impose higher mortgage rejection rates in high-healthcare-cost CBSAs, particularly for riskier applicants. These effects intensify following a policy shift that partially removed medical liabilities from credit reports without affecting consumer balance sheets. Our findings suggest that limiting the flow of medical liabilities data undermines the predictive accuracy of standard credit metrics, impairs the information value of credit bureau outputs, and leads to less efficient credit allocation.

How Do Debt Collection Restrictions Affect Hospitals and Patients?

Christine Zhuowei Huang, Amit Kumar, Lynn Linghuan Wang

Tighter regulations on consumer debt collectors, although intended to curb predatory practices, may disrupt industries to which such debts are owed. Using a paired-county stacked difference-in-differences design, we show that these regulations adversely affect hospitals. While hospital patient volume remains unchanged, their accounts receivable, liabilities, and profitability deteriorate, with stronger effects for ex-ante higher financial liability and debt collector density. Consequently, hospitals reduce capacity, employment, and care quality, and steer patients to high-cost procedures. Additionally, non-profit hospitals reduce charity care for uninsured patients. Overall, ignoring spillovers of consumer financial protection laws on non-financial sectors may overstate their benefits.

No Margins, No Mission: The Effects of Immigration on the Hospital Sector

Katharina Lewellen, Giorgo Sertsios, Jiadi Xu

Nonprofit organizations dominate the U.S. hospital sector, yet their objectives and constraints are not well understood. We shed light on these issues by studying how hospitals adjust their investment and financing decisions in response to immigration. Instrumenting for immigration inflows using historical enclaves of foreign-born nationalities, we find that a 1% increase in immigration (relative to the county’s initial population) leads to a 2.17% decline in hospital bed capacity over ten years. The effect is primarily driven by nonprofit hospitals, which are more likely to exit through closures or acquisitions. Continuing nonprofit hospitals experience a significant decline in their profit margins due to increased expenditure on uncompensated care. To cover the financial shortfalls, nonprofits curtail fixed-asset investments but do not raise additional funds. Our findings suggest that nonprofit hospitals operate under tight financing and operating constraints, underscoring a strong link between nonprofits’ ability to generate profits and their capacity to pursue “mission-driven” objectives.

The Unsecured Consequence: Youth Mental Health and Financial Distress

Atlas Wu

This paper investigates the long-term impact of youth mental health on financial distress using nationally representative survey data. I find that individuals with a higher propensity for youth mental health problems are significantly more likely to experience distress related to unsecured debt, but not secured debt. To mitigate potential endogeneity concerns, I instrument youth mental health propensity with prenatal exposure to alcohol or cigarettes. The results further indicate that the non-Hispanic, non-Black population is particularly susceptible to the adverse effects of youth mental health issues on unsecured debt distress. Differences in borrowing behavior, credit access, perceived costs of default, financial planning, and noncognitive abilities help explain these heterogeneous effects. Overall, the findings underscore the importance of policies aimed at improving youth mental health as a strategy for mitigating financial distress in adulthood.

Tunneling and Hidden Profits in Health Care

Ashvin Gandhi, Andrew Olenski

This study examines whether healthcare providers tunnel profits and assets to commonly-owned related parties by making inflated payments for their goods and services. Such practices allow providers to understate their profitability—which may encourage regulators to increase reimbursements and relax quality standards—and shield assets from malpractice liability. Using uniquely detailed nursing home financial data, we find evidence of widespread tunneling to related party real estate and management companies. Our estimates suggest that 68% of nursing home profits are tunneled to related parties and that accounting for tunneled profits and assets raises the implied typical investment IRR from 4.83% to 13.11%.

When Private Equity Comes to Town: The Local Economic Consequences of Rising Healthcare Costs

Cyrus Aghamolla, Jash Jain, Richard T. Thakor

We examine the effect of increased healthcare costs on local economic conditions. We use private equity buyouts of hospital systems as a shock to the healthcare costs faced by firms in affected areas. We provide evidence that private equity buyouts of hospital systems result in higher healthcare insurance premiums paid by firms, and such rises in premiums lead to higher business bankruptcies, an increase in business loan volume, slower employment and establishment growth, and reduced innovative output. The effects are more pronounced in areas with less competitive hospital markets, higher labor intensity, and fewer insurers providing coverage.

Le Méridien St. Louis Clayton 

Approximately 1.7 miles from the Charles F. Knight Center/Washington University campus.

7730 Bonhomme Avenue, St. Louis, MO 63105.  Phone: (314) 863-0400. 

The Cheshire Inn

Approximately 2 miles from the Charles F. Knight Center/Washington University campus.

Individual reservations can be made online using promo code WAS for WashU corporate rate.

6300 Clayton Road, St. Louis, MO 63117.  Phone: (314) 647-7300. 

The Ritz-Carlton, Clayton
Approximately 1 mile from the Charles F. Knight Center/Washington University Campus. 

Individual reservations can be made online using promo code WAS for WashU corporate rate.

100 Carondelet Plaza, St. Louis, MO 63105. Phone: (314) 863-6300.

Moonrise Hotel
Approximately 1 mile from the Charles F. Knight Center/Washington University Campus. 

For reservations: 314-721-1111. Ask for the Washington University rate.

University City Loop 6177 Delmar Blvd, St. Louis, MO 63112. Phone: (314) 721-1111.

AC Hotel St. Louis Central West End 

Approximately 2.9 miles from the Charles F. Knight Center/Washington University campus.

Individual reservations can be made online using promo code WAS for WashU corporate rate.

215 York Ave, St. Louis, MO 63108. Phone: (314) 887-4849. 

Kristen Jones
Operations Manager

Wells Fargo Advisors Center for Finance & Accounting Research
WashU Olin Business School

Email: kristen.jones@wustl.edu