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Does price deregulation in a competitive hospital market damage quality?

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  • Roos, Anne-Fleur
  • O’Donnell, Owen
  • Schut, Frederik T.
  • Van Doorslaer, Eddy
  • Van Gestel, Raf
  • Varkevisser, Marco

Abstract

Regulators may be hesitant to permit price competition in healthcare markets because of its potential to damage quality. We assess whether this fear is well founded by examining a reform that permitted Dutch health insurers to freely negotiate prices with hospitals. Unlike previous research on hospital competition that has relied on quality indicators for urgent treatments, we take advantage of a plausible absence of selection bias to identify the effect on the quality of elective procedures that should be more price responsive. Using data on all admissions for hip replacements to Dutch hospitals and a difference-in-differences comparison between more and less concentrated markets, we find no evidence that price deregulation in a competitive environment reduces quality measured by hip replacement readmission rates.

Suggested Citation

  • Roos, Anne-Fleur & O’Donnell, Owen & Schut, Frederik T. & Van Doorslaer, Eddy & Van Gestel, Raf & Varkevisser, Marco, 2020. "Does price deregulation in a competitive hospital market damage quality?," Journal of Health Economics, Elsevier, vol. 72(C).
  • Handle: RePEc:eee:jhecon:v:72:y:2020:i:c:s0167629618303539
    DOI: 10.1016/j.jhealeco.2020.102328
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    More about this item

    Keywords

    Healthcare; Hospital; Competition; Quality; Contracting;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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