Selecting health care providers: “Any willing provider” vs. negotiation

We study how a third-party payer decides what providers to contract with. Two mechanisms are studied and their properties compared. A first mechanism consists of the so-called “any willing provider” where the third-party payer announces a contract and every provider freely decides to sign it or not. The second mechanism is a bargaining procedure with the providers set up by the third-party payer. The main finding is that the decision of the third-party payer depends on the surplus to be shared. When it is relatively high (low) the third-party payer prefers the any willing provider system (negotiated solution).