E&F - lecture 15

Question 1

Perfect competition & health care markets?

Answer 1

“No other market of substantial importance violates the requirements of perfect competition so radically.”

Question 2

Hospital competition & quality

Answer 2

• Markets with regulated prices
• Competition –> quality improvement (that is , if P>MC)
• Markets where hospitals set prices & quality
• Competition –> ambiguous effects on quality
• Depends on price elasticity of demand v. quality elasticity of demand

Question 3

Impact hospital competition: empirical evidence

Answer 3

1. SCP (structure conduct performance)
2. Event study / DiD (differenxe in difference)

Question 4

Difference in difference

Answer 4

• Information before (t-1) and after (t+1) a certain event
• Hospitals in more competitive region are event group
• Hospitals in less competitive region are control group
• You can estimate a clear effect of introduction of competition

Question 5

Patient hospital choice & hospital competition

Answer 5

• Competition-based health care reforms
• Increase efficiency by stimulating provider competition
• Activity-based funding rather than global budgeting
• Incentives for hospitals to attract more patients
• Consumer quality information for patients
• Should encourage them to make active choice between alternative hospitals

Question 6

Patient hospital choice & hospital competition
At least three necessary conditions:

Answer 6

Ad 1) Sufficient number of hospital alternatives
* Hospital merger control
Ad 2) Information about hospital quality
* Market transparency initiatives
* For example, quality report cards and ratings
Ad 3) Patient choice & patient responsiveness to observed quality differences
* Free choice of hospital is required, but …
* … do patients respond to quality information?

Question 7

• Patient’s set of alternatives

Answer 7

choice set
- Hospital alternatives are mutually exclusive
- All possible hospital alternatives are included
- Number of hospital alternatives is finite

Question 8

• Logit model

Answer 8

• Probability that patient n chooses hospital alternative i
• Taking into account both patient heterogeneity and hospital differentiation

Question 9

• Empirical studies using panel data

Answer 9

• Impact of report cards on patient choice?
• Using data about patient choice before & after publication of quality information
• Mixed evidence

Question 10

• Empirical studies using cross-sectional data

Answer 10

• Relation between quality information and hospital demand
• Using data about patient choice after publication of quality information
• Most studies find patients are more likely to choose hospitals with higher quality, all else equal (e.g. Varkevisser et al., 2012)

Question 11

Attributes from when choosing a hospital for treatment

Answer 11

• Co-payment
• Travel time
• Own previous experiences
• Previous experiences friends and family
• Publicly available quality scores
• Recommendation GP
• Recommendation health insurer: We don’t trust the health insurer, even though they have information about quality

Question 12

• Markets with regulated prices

Answer 12

• No price competition
• Only competition about quality
• That is if P>MC

Question 13

• Markets were hospitals set prices and quality

Answer 13

• Hospitals and insurer negotiate about prices
• This is in the Netherlands
• The effect on quality is ambiguous
• Depends on price elasticity of demand v. quality elasticity of demand