Does Price Competition Damage Healthcare Quality?

Tinbergen Institute Discussion Paper 2018-040/V

33 Pages Posted: 18 May 2018

See all articles by Anne-Fleur Roos

Anne-Fleur Roos

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Eddy van Doorslaer

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Frederik Schut

Erasmus School of Health Policy & Management (ESHPM)

Marco Varkevisser

Erasmus University Rotterdam (EUR)

Date Written: April 25, 2018

Abstract

One of the reasons why regulators are hesitant about permitting price competition in healthcare markets is that it may damage quality when information is poor. Evidence on whether this fear is well-founded is scarce. We provide evidence using a reform that permitted Dutch health insurers and hospitals to freely negotiate prices for elective procedures. Unlike previous research that has relied on indicators of the quality of urgent treatments, we take advantage of the plausible absence of selection bias in our setting to identify the effect on quality of non-acute hip replacements. Using administrative data on all admissions to Dutch hospitals, we find no evidence that increased exposure to price competition reduces quality measured by readmission rates, despite the lack of publicly available information on this outcome. In fact, there is evidence of a temporary, positive impact on quality. Our estimated null effect over the full post-liberalization period is robust.

Keywords: healthcare, hospital, competition, quality, contracting

JEL Classification: I11, L14, L15

Suggested Citation

Roos, Anne-Fleur and van Doorslaer, Eddy and O'Donnell, Owen and Schut, Frederik and Varkevisser, Marco, Does Price Competition Damage Healthcare Quality? (April 25, 2018). Tinbergen Institute Discussion Paper 2018-040/V, Available at SSRN: https://ssrn.com/abstract=3168462 or http://dx.doi.org/10.2139/ssrn.3168462

Anne-Fleur Roos (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Eddy Van Doorslaer

Erasmus University Rotterdam (EUR) - Institute of Health Policy and Management

Netherlands

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Frederik Schut

Erasmus School of Health Policy & Management (ESHPM) ( email )

Netherlands

Marco Varkevisser

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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