Abstract: With the growing quantity of private hospitals, their participation in the volume-based procurement policy is critical for further reducing medicine prices and improving people’s access to medicine. This paper develops a model of dynamic game among medicine manufacturers, GPO and hospitals, in which private hospitals’ price sensitivity and negotiation ability are considered. Our analysis examines engagement strategies of private hospitals when the price is open or not open under the volume-based procurement policy. The research shows that, compared with the open selected price of volume-based procurement, private hospitals’ purchasing price and cost are higher when the price is not open, which leads to an increase of their willingness to join the policy. At the same time, the medicine price of public hospitals decreases and social welfare increases. Whether the price is open or not, the willingness of private hospitals to join volume-based procurement increases when the direct negotiation cost is higher than a certain threshold, but the threshold is lower when it is not open. The above conclusions have important reference value for improving the volume-based procurement policy and encouraging private hospitals to participate.

Key words: volume-based procurement, private hospitals, willingness to join, price disclosure mechanism