Market structure and hospital–insurer bargaining in the Netherlands

In 2005, competition was introduced in part of the hospital market in the Netherlands. Using a unique dataset of transactions and list prices between hospitals and insurers in the years 2005 and 2006, we estimate the influence of buyer and seller concentration on the negotiated prices. First, we use a traditional structure–conduct–performance model (SCP-model) along the lines of Melnick et al. (J Health Econ 11(3): 217–233, 1992) to estimate the effects of buyer and seller concentration on price–cost margins. Second, we model the interaction between hospitals and insurers in the context of a generalized bargaining model similar to Brooks et al. (J Health Econ 16: 417–434, 1997). In the SCP-model, we find that the market shares of hospitals (insurers) have a significantly positive (negative) impact on the hospital price–cost margin. In the bargaining model, we find a significant negative effect of insurer concentration, but no significant effect of hospital concentration. In both models, we find a significant impact of idiosyncratic effects on the market outcomes. This is consistent with the fact that the Dutch hospital sector is not yet in a long-run equilibrium

Public service markets: their economics, institutional oversight and regulation

Public services in the UK have been transformed over the past 25 years with the introduction of market oriented solutions into their provision. This has been characterised by a shift away from state provision to independent providers, and by the introduction of competition and choice. This shift was partly ideologically motivated and partly driven by budget cutting considerations following the financial crisis. As such it has been lacking a comprehensive economic justification or method of analysis. It is now commonly accepted that the language of economic markets is essential to frame arguments about how effectively public services are achieving their intended outcomes. Using market language and concepts may not always be comfortable for those from a traditional policy-making background. It can nevertheless be very useful when designing investigations into the effectiveness and value for money in the mechanisms of delivery of such services, whenever these services entail a degree of user choice as is currently the case in large parts of health, social care and education (referred to as competition in the market). Our paper wants to provide a conceptual basis on the way of thinking in these terms. We provide a description of the current state and then comment on the desirability of this quasi market approach. Uniquely in the literature, we analyse the expected and desired developments by distinguishing between choice and compulsory merit goods. In choice merit goods markets many users are unable to choose effectively because of the existence of a number of demand side or supply side market failures. Moreover, conflicts may exist between how service users actually make choices, and policy objectives such as universality or equity which may not be achieved simply by ‘leaving it to the market’. The users of compulsory merit goods are typically a minority and unable to internalise the full social benefits of their actions; hence it may be welfare-enhancing for society to coerce them ‘consume’ these services. As choice cannot be an objective, the commissioning (competition for the market) or direct provision by the state of such goods may meet public policy objectives more effectively than the market mechanism alone. Building on these foundations the paper discusses when public service markets are likely to be an effective method of achieving public policy objectives, and when they may not be. Our paper analyses the implications for the institutional and legal framework, funding oversight and regulation of public service markets as a result of their transformation into quasi-markets. The paper concludes with some suggestions for those charged with overseeing public service markets in practice based on this analysis

From Providers to PHOs: an institutional analysis of nonprofit primary health care governance in New Zealand

Policy reforms to primary health care delivery in New Zealand required government-funded firms overseeing care delivery to be constituted as nonprofit entities with governance shared between consumer and producers. This paper examines the consumer and producer interests in the allocation of ownership and control of New Zealand firms delivering primary health care utilising theories of competition in the markets for ownership and control of firms. Consistent with pre-reform patterns of ownership and control provider interests appear to have exerted effective control over the formation and governance of the new entities in all but a few cases where community (consumer) control was already established. Their ability to do so is implied from the absence of a defined ownership stake via which the balance of governance control could shift as a consequence of changes to incentives facing the different stakeholding groups. It appears that the pre-existing patterns will prevail and further intervention will be required if policymakers are to achieve their underlying aims

Incorporating health care quality into health antitrust law

<p>Abstract</p> <p>Background</p> <p>Antitrust authorities treat price as a proxy for hospital quality since health care quality is difficult to observe. As the ability to measure quality improved, more research became necessary to investigate the relationship between hospital market power and patient outcomes. This paper examines the impact of hospital competition on the quality of care as measured by the risk-adjusted mortality rates with the hospital as the unit of analysis. The study separately examines the effect of competition on non-profit hospitals.</p> <p>Methods</p> <p>We use California Office of Statewide Health Planning and Development (OSHPD) data from 1997 through 2002. Empirical model is a cross-sectional study of 373 hospitals. Regression analysis is used to estimate the relationship between Coronary Artery Bypass Graft (CABG) risk-adjusted mortality rates and hospital competition.</p> <p>Results</p> <p>Regression results show lower risk-adjusted mortality rates in the presence of a more competitive environment. This result holds for all alternative hospital market definitions. Non-profit hospitals do not have better patient outcomes than investor-owned hospitals. However, they tend to provide better quality in less competitive environments. CABG volume did not have a significant effect on patient outcomes.</p> <p>Conclusion</p> <p>Quality should be incorporated into the antitrust analysis. When mergers lead to higher prices and lower quality, thus lower social welfare, the antitrust challenge of hospital mergers is warranted. The impact of lower hospital competition on quality of care delivered by non-profit hospitals is ambiguous.</p

Are waiting times for hospital admissions affected by patients' choices and mobility?

Background Waiting times for elective care have been considered a serious problem in many health care systems. A topic of particular concern has been how administrative boundaries act as barriers to efficient patient flows. In Norway, a policy combining patient's choice of hospital and removal of restriction on referrals was introduced in 2001, thereby creating a nationwide competitive referral system for elective hospital treatment. The article aims to analyse if patient choice and an increased opportunity for geographical mobility has reduced waiting times for individual elective patients. Methods A survey conducted among Norwegian somatic patients in 2004 gave information about whether the choice of hospital was made by the individual patient or by others. Survey data was then merged with administrative data on which hospital that actually performed the treatment. The administrative data also gave individual waiting time for hospital admission. Demographics, socio-economic position, and medical need were controlled for to determine the effect of choice and mobility upon waiting time. Several statistical models, including one with instrument variables for choice and mobility, were run. Results Patients who had neither chosen hospital individually nor bypassed the local hospital for other reasons faced the longest waiting times. Next were patients who individually had chosen the local hospital, followed by patients who had not made an individual choice, but had bypassed the local hospital for other reasons. Patients who had made a choice to bypass the local hospitals waited on average 11 weeks less than the first group. Conclusion The analysis indicates that a policy combining increased opportunity for hospital choice with the removal of rules restricting referrals can reduce waiting times for individual elective patients. Results were robust over different model specifications

Incentive Compatible Reimbursement Schemes for Physicians

We consider physicians with fixed capacity levels. If a physician’s capacity exceeds demand, she may have an incentive to overtreat, i.e., she may provide unnecessary treatments to use up idle capacity. By contrast, with excess demand she may undertreat, i.e., she may not provide necessary treatments since other activities are financially more attractive. We first show that simple fee-for-service reimbursement schemes do not provide proper incentives. If insurers use, however, fee-for-service schemes with quantity restrictions, they solve the fraudulent physician problem

The relationship between safety net activities and hospital financial performance

<p>Abstract</p> <p>Background</p> <p>During the 1990's hospitals in the U.S were faced with cost containment charges, which may have disproportionately impacted hospitals that serve poor patients. The purposes of this paper are to study the impact of safety net activities on total profit margins and operating expenditures, and to trace these relationships over the 1990s for all U.S urban hospitals, controlling for hospital and market characteristics.</p> <p>Methods</p> <p>The primary data source used for this analysis is the Annual Survey of Hospitals from the American Hospital Association and Medicare Hospital Cost Reports for years 1990-1999. Ordinary least square, hospital fixed effects, and two-stage least square analyses were performed for years 1990-1999. Logged total profit margin and operating expenditure were the dependent variables. The safety net activities are the socioeconomic status of the population in the hospital serving area, and Medicaid intensity. In some specifications, we also included uncompensated care burden.</p> <p>Results</p> <p>We found little evidence of negative effects of safety net activities on total margin. However, hospitals serving a low socioeconomic population had lower expenditure raising concerns for the quality of the services provided.</p> <p>Conclusions</p> <p>Despite potentially negative policy and market changes during the 1990s, safety net activities do not appear to have imperiled the survival of hospitals. There may, however, be concerns about the long-term quality of the services for hospitals serving low socioeconomic population.</p