Price Negotiations in Health Care Services: Netherlands' Home Care
Posted: 21 Jun 2007
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: Suggested Citation