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Does managed competition constrain hospitals' contract prices? Evidence from the Netherlands

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  • Douven, Rudy
  • Burger, Monique
  • Schut, Frederik

Abstract

In the Dutch health care system, health insurers negotiate with hospitals about the pricing of hospital products in a managed competition framework. In this paper, we study these contract prices that became for the first time publicly available in 2016. The data show substantive price variation between hospitals for the same products, and within a hospital for the same product across insurers. About 27% of the contract prices for a hospital product are at least 20% higher or lower than the average contract price in the market. For about half of the products, the highest and the lowest contract prices across hospitals differ by a factor of three or more. Moreover, hospital product prices do not follow a consistent ranking across hospitals, suggesting substantial cross-subsidization between hospital products. Potential explanations for the large and seemingly random price variation are: (i) different cost pricing methods used by hospitals, (ii) uncertainty due to frequent changes in the hospital payment system, (iii) price adjustments related to negotiated lumpsum payments and (iv) differences in hospital and insurer market power. Several policy options are discussed to reduce variation and increase transparency of hospital prices.

Suggested Citation

  • Douven, Rudy & Burger, Monique & Schut, Frederik, 2020. "Does managed competition constrain hospitals' contract prices? Evidence from the Netherlands," Health Economics, Policy and Law, Cambridge University Press, vol. 15(3), pages 341-354, July.
  • Handle: RePEc:cup:hecopl:v:15:y:2020:i:3:p:341-354_4
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 6th July 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-07-06 11:00:00

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    1. Chiara Brouns & Rudy Douven & Ron Kemp, 2021. "Prices and market power in mental health care: Evidence from a major policy change in the Netherlands," Health Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 803-819, April.

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