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Market share and price in Dutch home care: market power or quality?

Author

Listed:
  • Marc Pomp
  • Victoria Shestalova
  • I. Mosca

Abstract

A change of legislation in 2004 of the Dutch Exceptional Medical Expenses Act (EMEA) allowed for more competition among suppliers of home care. A change of legislation in 2004 of the Dutch Exceptional Medical Expenses Act (EMEA) allowed for more competition among suppliers of home care. The new law made it possible for the 32 regional healthcare purchasing agencies to contract suppliers selectively and to negotiate over prices and quality. Since, at least in some regions, one or two providers dominate the market, there are concerns about the effect of providers' market power on the pricing of home care services. This paper tries to assess whether these concerns are justified. Using complete data on contracted prices and quantities for 2004-2006, we find that, indeed, providers with a larger market share are able to contract at a higher price. We also find significant differences in contracted prices for some healthcare purchasing agencies, which points towards differences in their regional situations and/or policies. It is conceivable that both differences in market share and differences in price are driven by unobserved differences in quality. However, our analysis based on quality data reported in a consumer survey does not support this explanation.

Suggested Citation

  • 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.
    • Handle: RePEc:cpb:discus:95
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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