Hospital Competition in the Netherlands: An Empirical Investigation
CentER Discussion Paper No. 2019-018
31 Pages Posted: 22 May 2019 Last revised: 29 May 2019
Date Written: May 7, 2019
The Dutch government introduced managed competition to the health care sec-tor in 2006. In this regulatory framework insurers compete for enrollees and providers compete for contracts with insurers. The resulting contracts are determined by bargaining, which outcome depends on the relative position of the provider. In this paper, we compare how commonly used market power indicators predict bargaining outcomes. We combine 2013 transaction data with bilateral contract data. Our empirical models explain the relative diﬀerences in hospitals’ revenues while controlling for diﬀerences in the complexity of patients. Four indicators are used: the logit competition index (LOCI), willingness-to-pay (WTP), Elzinga-Hogarty market share and a rule-of-thumb market share. We ﬁnd that WTP and LOCI perform best empirically.
Keywords: Hospital competition, Market power, Bargaining
JEL Classification: I11, L44, L13, D22
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