Price Negotiations in Health Care Services: Netherlands' Home Care

Posted: 21 Jun 2007

See all articles by Ilaria Mosca

Ilaria Mosca

Tilburg Law and Economics Center (TILEC); Dutch Healthcare Authority

Marc Pomp

CPB Netherlands Bureau of Economic Policy Analysis

Victoria Shestalova

Netherlands Bureau for Economic Policy Analysis

Abstract

A change of legislation in 2003 of the Dutch Exceptional Medical Expenses Act (EMEA) allowed for more competition among suppliers of home care. The new law made it possible for the 32 regional health care purchasing agencies to contract suppliers selectively and to negotiate over prices and quality. Since, at least in some regions, one or two providers dominate the market, while purchasing agencies have an obligation to contract the necessary amounts of care, there are concerns about the effect of concentration among suppliers on the pricing of home care services. This paper tries to assess whether these concerns are justified. Using complete data on contracted prices and quantities for 2004-2006, we obtain in a cross-section analysis that, indeed, providers with a larger market share are able to contract at a higher price. We also find significant differences in contracted prices for some health care purchasing agencies, which point towards differences in their regional situations and/or policies. It is conceivable that both differences in market share and differences in price are driven by unobserved differences in quality. However, our analysis based on subjective quality data does not support this explanation.

Keywords: market structure, bargaining, health care

JEL Classification: D4, I18

Suggested Citation

Mosca, Ilaria and Pomp, Marc and Shestalova, Victoria, Price Negotiations in Health Care Services: Netherlands' Home Care. iHEA 2007 6th World Congress: Explorations in Health Economics Paper, Available at SSRN: https://ssrn.com/abstract=992820

Ilaria Mosca

Tilburg Law and Economics Center (TILEC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Dutch Healthcare Authority ( email )

Postbus 3017
Utrecht, 3502 GA
Netherlands

Marc Pomp

CPB Netherlands Bureau of Economic Policy Analysis ( email )

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

Victoria Shestalova (Contact Author)

Netherlands Bureau for Economic Policy Analysis ( email )

2508 GM The Hague
Netherlands

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