Does purchase centralization reduce public expenditure? Evidence from the Italian healthcare system

The introduction of Central Purchasing Bodies within the regional health care systems in Italy during the first decade of 2000s constituted a call for cost reduction and public expenditure restraint in the public health sector. Indeed, regional CPBs operating for local hospitals were introduced to centralize purchases of goods and services, with the aim of reducing prices and facilitate cost reductions, mainly leveraging on economies of scale and larger bargaining power. In this work, we examine this hypothesis adopting a difference-in-difference model to test the causal relationship of the introduction of regional CPBs operating in the health-care systems. Our findings show that per capita total expenditure is reduced to a range of 3-4%, according to the specification of the model, where local hospitals are supplied through a regional CPB. Specifically, this reduction is mainly driven by a subset of supplies, that is health services (e.g., medical and other health-related professional consultancies), while the impact on goods and other non-health services expenditure is not significant. Moreover, the obtained expenditure reduction is achieved without a significant downsizing of local services to citizens.