Reconsidering Government Intervention in Hospital Bankruptcies: The Case of the Netherlands

23 Pages Posted: 8 Aug 2013

See all articles by Viktoria Kocsis

Viktoria Kocsis

University of Amsterdam - SEO Economic Research

Pierre Koning

CPB Netherlands Bureau of Economic Policy Analysis

Esther Mot

CPB Netherlands Bureau of Economic Policy Analysis

Date Written: March 2012

Abstract

In this paper, we assess the optimality of bankruptcies among hospitals in the Netherlands. Following the standard principles of bankruptcy theory, there is no strong case for governments to support hospitals that are in financial distress. Such intervention reduces hospitals’ incentives to avoid bankruptcies and also potentially allows inefficient hospitals to continue to operate. Within the context of the Netherlands, however, the question emerges whether this principle also holds for general hospitals that are faced with the non-profit constraint. In the absence of government intervention, there is a higher risk of too early liquidation. We therefore argue that more market dynamics is needed by allowing private equity in hospitals’ capital structure, thus releasing entry barriers.

Keywords: hospital market, bankruptcy, reorganisation, liquidation, non-profit organisations, government support

JEL Classification: G32, G33, H81, I11, I18

Suggested Citation

Kocsis, Viktoria and Koning, Pierre and Mot, Esther, Reconsidering Government Intervention in Hospital Bankruptcies: The Case of the Netherlands (March 2012). Available at SSRN: https://ssrn.com/abstract=2306992 or http://dx.doi.org/10.2139/ssrn.2306992

Viktoria Kocsis (Contact Author)

University of Amsterdam - SEO Economic Research ( email )

Roetersstraat 29
Amsterdam, 1018 WB
Netherlands

Pierre Koning

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands
+31 703383380 (Phone)
+31 703383350 (Fax)

Esther Mot

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

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