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Market Structure and Hospital-Insurer Bargaining in the Netherlands

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Author Info

  • Halbersma, R.S.
  • Mikkers, M.C.
  • Motchenkova, E.
  • Seinen, I.

    (Tilburg University, Tilburg Law and Economics Center)

Abstract

In 2005, competition was introduced in part of the hospital market in the Netherlands. Using a unique dataset of transaction and list prices between hospitals and insurers in the years 2005 and 2006, we estimate the influence of buyer and seller concentration on the negotiated prices in the first two years after the institutional change. First, we use a traditional Structure- Conduct-Performance model (SCP-model) along the lines of Melnick et al. (1992) to estimate the effects of buyer and seller concentration on price-cost margins. Second, we model the interaction between hospitals and insurers in the context of a generalized bargaining model (Brooks et al., 1997). In the SCP-model, we obtain that the concentration of hospitals (insurers) has a significantly positive (negative) impact on the hospital price-cost margin. In the bargaining model, we also find a significant negative effect of insurer concentration on the bargaining share of hospital, but no significant effect of hospital concentration on the division of the gains from bargaining. In both models we find a significant impact of idiosyncratic effects on the market outcomes, consistent with the fact that the Dutch hospital sector is not yet in a long-run equilibrium.

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Bibliographic Info

Paper provided by Tilburg University, Tilburg Law and Economic Center in its series Discussion Paper with number 2007-006.

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Date of creation: 2007
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Handle: RePEc:dgr:kubtil:2007006

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Web page: http://www.tilburguniversity.nl/tilec/

Related research

Keywords: Competition; Market Structure; Hospitals; Insurers; Bargaining;

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References

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  1. Lynk, William J. & Neumann, Lynette R., 1999. "Price and profit," Journal of Health Economics, Elsevier, vol. 18(1), pages 99-116, January.
  2. John Simpson & Richard Shin, 1998. "Do Nonprofit Hospitals Exercise Market Power?," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 5(2), pages 141-157.
  3. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. " Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-63, Winter.
  4. Staten, Michael & Dunkelberg, William & Umbeck, John, 1987. "Market share and the illusion of power : Can blue cross force hospitals to discount?," Journal of Health Economics, Elsevier, vol. 6(1), pages 43-58, March.
  5. Lynk, William J, 1995. "Nonprofit Hospital Mergers and the Exercise of Market Power," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 437-61, October.
  6. Martin Gaynor & William B Vogt, 2003. "Competition among Hospitals," The Centre for Market and Public Organisation 03/087, Department of Economics, University of Bristol, UK.
  7. Brooks, John M. & Dor, Avi & Wong, Herbert S., 1997. "Hospital-insurer bargaining: An empirical investigation of appendectomy pricing," Journal of Health Economics, Elsevier, vol. 16(4), pages 417-434, August.
  8. Cutler, David, 2002. "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform," Scholarly Articles 2640584, Harvard University Department of Economics.
  9. Adamache, Killard W. & Sloan, Frank A., 1983. "Competition between non-profit and for-profit health insurers," Journal of Health Economics, Elsevier, vol. 2(3), pages 225-243, December.
  10. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-78, September.
  11. Keeler, Emmett B. & Melnick, Glenn & Zwanziger, Jack, 1999. "The changing effects of competition on non-profit and for-profit hospital pricing behavior," Journal of Health Economics, Elsevier, vol. 18(1), pages 69-86, January.
  12. Staten, Michael & Umbeck, John & Dunkelberg, William, 1988. "Market share/market power revisited : A new test for an old theory," Journal of Health Economics, Elsevier, vol. 7(1), pages 73-83, March.
  13. Martin, Stephen, 1988. "The measurement of profitability and the diagnosis of market power," International Journal of Industrial Organization, Elsevier, vol. 6(3), pages 301-321.
  14. Martin Gaynor & William B. Vogt, . "Antitrust and Competition in Health Care Markets," GSIA Working Papers 1999-E29, Carnegie Mellon University, Tepper School of Business.
  15. Martin Gaynor & Robert J. Town, 2011. "Competition in Health Care Markets," NBER Working Papers 17208, National Bureau of Economic Research, Inc.
  16. Noether, Monica, 1988. "Competition among hospitals," Journal of Health Economics, Elsevier, vol. 7(3), pages 259-284, September.
  17. Town, Robert & Vistnes, Gregory, 2001. "Hospital competition in HMO networks," Journal of Health Economics, Elsevier, vol. 20(5), pages 733-753, September.
  18. Dranove, David & Ludwick, Richard, 1999. "Competition and pricing by nonprofit hospitals: a reassessment of Lynk's analysis," Journal of Health Economics, Elsevier, vol. 18(1), pages 87-98, January.
  19. Van de ven, Wynand P.M.M. & Ellis, Randall P., 2000. "Risk adjustment in competitive health plan markets," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 14, pages 755-845 Elsevier.
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Citations

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Cited by:
  1. Martin Gaynor & Robert J. Town, 2011. "Competition in Health Care Markets," NBER Working Papers 17208, National Bureau of Economic Research, Inc.
  2. Marc Pomp & Victoria Shestalova & I. Mosca, 2007. "Market share and price in Dutch home care: market power or quality?," CPB Discussion Paper 95, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Ilaria Mosca & Marc Pomp & Victoria Shestalova, 2010. "Market Share and Price in Dutch Home Care: Market Power or Quality?," De Economist, Springer, vol. 158(1), pages 61-79, April.
  4. Ron Kemp & Nikki Kersten & Astrid Severijnen, 2012. "Price Effects of Dutch Hospital Mergers: An Ex-post Assessment of Hip Surgery," De Economist, Springer, vol. 160(3), pages 237-255, September.
  5. Martin Gaynor & Kate Ho & Robert Town, 2014. "The Industrial Organization of Health Care Markets," NBER Working Papers 19800, National Bureau of Economic Research, Inc.
  6. Alfons Palangkaraya & Jongsay Yong, 2013. "Effects of competition on hospital quality: an examination using hospital administrative data," The European Journal of Health Economics, Springer, vol. 14(3), pages 415-429, June.
  7. Schmid, Andreas & Ulrich, Volker, 2013. "Consolidation and concentration in the German hospital market: The two sides of the coin," Health Policy, Elsevier, vol. 109(3), pages 301-310.

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