Competition and quality indicators in the health care sector: empirical evidence from the Dutch hospital sector

textabstractThere is much debate about the effect of competition in healthcare and especially the effect of competition on the quality of healthcare, although empirical evidence on this subject is mixed. The Netherlands provides an interesting case in this debate. The Dutch system could be characterized as a system involving managed competition and mandatory healthcare insurance. Information about the quality of care provided by hospitals has been publicly available since 2008. In this paper, we evaluate the relationship between quality scores for three diagnosis groups and the market power indicators of hospitals. We estimate the impact of competition on quality in an environment of liberalized pricing. For this research, we used unique price and production data relating to three diagnosis groups (cataract, adenoid and tonsils, bladder tumor) produced by Dutch hospitals in the period 2008–2011. We also used the quality indicators relating to these diagnosis groups. We reveal a negative relationship between market share and quality score for two of the three diagnosis groups studied, meaning that hospitals in competitive markets have better quality scores than those in concentrated markets. We therefore conclude that more competition is associated with higher quality scores

Competition in the Dutch hospital sector: an analysis of health care volume and cost

This paper evaluates the impact of market competition on health care volume and cost. At the start of 2005, the financing system of Dutch hospitals started to be gradually changed from a closed-end budgeting system to a non-regulated price competitive prospective reimbursement system. The gradual implementation of price competition is a ‘natural experiment’ that provides a unique opportunity to analyze the effects of market competition on hospital behavior. We have access to a unique database, which contains hospital discharge data of diagnosis treatment combinations (DBCs) of individual patients, including detailed care activities. Difference-in-difference estimates show that the implementation of market-based competition leads to relatively lower total costs, production volume and number of activities overall. Difference-in-difference estimates on treatment level show that the average costs for outpatient DBCs decreased due to a decrease in the number of activities per DBC. The introduction of market competition led to an increase of average costs of inpatient DBCs. Since both volume and number of activities have not changed significantly, we conclude that the cost increase is likely the result of more expensive activities. A possible explanation for our finding is that hospitals look for possible efficiency improvements in predominantly outpatient care products that are relatively straightforward, using easily analyzable technologies. The effects of competition on average cost and the relative shares of inpatient and outpatient treatments on specialty level are significant but contrary for cardiology and orthopedics, suggesting that specialties react differently to competitive incentives