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Market share and price in Dutch home care: market power or quality?

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  • Marc Pomp
  • Victoria Shestalova

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  • I. Mosca
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    Abstract

    A change of legislation in 2004 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 healthcare 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, there are concerns about the effect of providers' market power 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 find 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 healthcare purchasing agencies, which points 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 quality data reported in a consumer survey does not support this explanation.

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    Bibliographic Info

    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 95.

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    Date of creation: Dec 2007
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    Handle: RePEc:cpb:discus:95

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    1. R. Halbersma & M. Mikkers & E. Motchenkova & I. Seinen, 2011. "Market structure and hospital–insurer bargaining in the Netherlands," The European Journal of Health Economics, Springer, vol. 12(6), pages 589-603, December.
    2. Melnick, Glenn A. & Zwanziger, Jack & Bamezai, Anil & Pattison, Robert, 1992. "The effects of market structure and bargaining position on hospital prices," Journal of Health Economics, Elsevier, vol. 11(3), pages 217-233, October.
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