Price Setting Behavior in the Hospital Sector in Belgium

Abstract

Background: Belgium has dominantly fee for service remuneration with fixed official tariffs for medical and paramedical interventions, implants and nursing and hotel costs in hospital. On top of these tariffs there is a large degree of freedom to charge additional fees, so-called supplements. Protective legislation limits this freedom in common rooms and for people with preferential insurance status (reflecting weaker socio-economic groups). Objective: The objective of this paper is to analyse how the freedom to set prices is used by the providers and to evaluate the impact of the protective regulation.

Methods: Data on 55,000 hospitalisations, retrieved from an administrative database and relating to all hospitalisations of a representative sample of 300,000 individuals for 2003 are used. To approximate the price setting behavior of hospitals we calculate 'unit supplement prices' by taking the ratio of supplements over total official health care expenditures. This is done at the level of the hospital stay, for 16 different medical aggregates (e.g. surgical fees, gyneacology fees, room charges). In a multiple regression analysis, regional and hospital variabels are related to these calculated unit prices. We perform separate analyses for the different room types and for people with preferential insurance status or not, to take account of the protective regulation.

Results: Supplements are surprisingly large for a country with a regulated health care system. E.g. supplement gyneacologocial fees in one person-rooms are on average 100% of the official tariff. The geographical differentiation in supplements is particularly strong for medical fees and room charges. However only a very small fraction of the variation can be explained on the basis of the observable hospital characteristics. This suggests the market is not transparant and raises questions about the efficiency of consumer choice. The results further show that, thanks to the regulation, people with preferential insurance status and admitted in common rooms, are protected against high supplement unit prices. However, the protection is far from perfect. In total, the weaker socio-economic groups pay the same amount of supplements, because the lower unit-prices are compensated by longer lengths of stay.

Conclusions: Large variation in price setting behavior in hospitals can be found in Belgium. Prices have a strong regional clustering, but are in general intransparant, putting doubts about the proper functioning of this market. Protective legislation is respected, but should pay more attention to morbidity and length of stay to be efficient for the weaker socio-economic groups.

Keywords: price controls, user fees, inpatient cost

JEL Classification: D49