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

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

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

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

Returns to physician human capital: Evidence from patients randomized to physician teams

Physicians play a major role in determining the cost and quality of healthcare, yet estimates of these effects can be confounded by patient sorting. This paper considers a natural experiment where nearly 30,000 patients were randomly assigned to clinical teams from one of two academic institutions. One institution is among the top medical schools in the U.S., while the other institution is ranked lower in the distribution. Patients treated by the two programs have similar observable characteristics and have access to a single set of facilities and ancillary staff. Those treated by physicians from the higher ranked institution have 10–25% less expensive stays than patients assigned to the lower ranked institution. Health outcomes are not related to the physician team assignment. Cost differences are most pronounced for serious conditions, and they largely stem from diagnostic-testing rates: the lower ranked program tends to order more tests and takes longer to order them