Market share and the illusion of power. Can Blue Cross force hospitals to discount?

Researchers in health care financing have claimed that large private insurers like Blue Cross frequently exercise monopsony power to obtain discounts from normal hospital charges. They claim that the monopsony power derives from a large Blue Cross share of a given hospital 'cost shifting', whereby hospitals offset the discount by raising charges to less powerful customers. This paper re-examines both theoretically and empirically the conditions necessary for a private insurer to extract discounts from a hospital.