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Factors affecting the entry of for-profit providers into a price regulated market for formal long-term care services: A case study from Japan

  • Tokunaga, Mutsumi
  • Hashimoto, Hideki
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    While the distinct behaviors of for-profit and non-profit providers in the healthcare market have been compared in the economic literature, their choices regarding market entry and exit have only recently been debated. Since 2000, when public Long-Term Care Insurance was introduced in Japan, for-profit providers have been able to provide formal long-term homecare services. The aim of this study is to determine which factors have affected market entry of for-profit providers under price regulation and in competition with existing non-profit providers. We used nation-wide panel data from 2002 to 2010, aggregated at the level of local public insurers (n = 1557), a basic area unit of service provision. The number of for-profit providers per elderly population in the area unit was regressed against factors related to local demand and service costs using first-difference linear regression, a fixed effects model, and Tobit regression for robustness checking. Results showed that demand (the number of eligible care recipients) and cost factors (population density and minimum wage) significantly influenced for-profit providers' choice of market entry. These findings indicate that for-profit providers will strategically choose a local market for maximizing profit. We believe that price regulation should be redesigned to incorporate quality of care and market conditions, regardless of the profit status of the providers, to ensure equal access to efficient delivery of long-term care across all regions.

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    Article provided by Elsevier in its journal Social Science & Medicine.

    Volume (Year): 76 (2013)
    Issue (Month): C ()
    Pages: 143-149

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    Handle: RePEc:eee:socmed:v:76:y:2013:i:c:p:143-149
    DOI: 10.1016/j.socscimed.2012.10.018
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    1. Flath, David, 2005. "The Japanese Economy," OUP Catalogue, Oxford University Press, edition 2, number 9780199278619, December.
    2. Henry Hansmann & Daniel Kessler & Mark McClellan, 2002. "Ownership Form and Trapped Capital in the Hospital Industry," NBER Working Papers 8989, National Bureau of Economic Research, Inc.
    3. repec:ebl:ecbull:v:9:y:2005:i:3:p:1-13 is not listed on IDEAS
    4. Darius Lakdawalla & Tomas Philipson, 1998. "Nonprofit Production and Competition," NBER Working Papers 6377, National Bureau of Economic Research, Inc.
    5. Haruko Noguchi & Satoshi Shimizutani, 2005. "Nonprofit and For-profit Providers in Japan's At-home Care Industry: Evidence on Quality of Service and Household Choice," Hi-Stat Discussion Paper Series d04-73, Institute of Economic Research, Hitotsubashi University.
    6. Hirth, Richard A., 1999. "Consumer information and competition between nonprofit and for-profit nursing homes," Journal of Health Economics, Elsevier, vol. 18(2), pages 219-240, April.
    7. SHIMIZUTANI Satoshi & SUZUKI Wataru, 2002. "The Quality and Efficiency of At-Home Long-term Care in Japan: Evidence from Micro-level Data," ESRI Discussion paper series 018, Economic and Social Research Institute (ESRI).
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