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

Price transparency in the Dutch market-based health care system: did price dispersion for similar hospital services reduce over time?

In market-based health care systems, insurers negotiate prices of hospital care products with providers. While few countries disclose these negotiated prices, in 2016, the Dutch government required the disclosure of insurer-provider negotiated prices for hospital products up to €885 - the maximum deductible in the Netherlands - to enhance price transparency. This aimed to increase price awareness among and price transparency for consumers, insurers, and providers, fostering price competition. We study if price dispersion for relatively homogeneous hospital care products decreased post-publication, resulting in price convergence. We used negotiated price data from three major Dutch health insurers on over 200 hospital products. Using descriptive statistics and linear regression, with the coefficient of variation (a measure of dispersion) regressed on the year, we examined the development of price dispersion and the occurrence of price convergence. Price dispersion for the studied sample of hospital products decreased by an average of 29% between 2016 and 2022. This decrease was not accompanied by a price level increase that was larger than expected based on general inflation. Regression analysis showed a significant negative association between year and the coefficient of variation, indicating price convergence. These findings support our hypothesis that price dispersion decreased after mandatory price disclosure. The government mandate potentially increased awareness of largely unexplainable price differences for products priced below €885, encouraging insurers and providers to reduce these through the negotiation process. The observed price convergence likely benefits patients, as it results in less random out-of-pocket payments across providers for the same hospitals products.

Does hospital competition improve the quality of outpatient care? - empirical evidence from a quasi-experiment in a Chinese city

BACKGROUND

Although countries worldwide have launched a series of pro-competition reforms, the literature on the impacts of hospital competition has produced a complex and contradictory picture. This study examined whether hospital competition contributed to an increase in the quality of outpatient care.

METHODS

The dataset comprises encounter data on 406,664 outpatients with influenza between 2015 and 2019 in China. Competition was measured using the Herfindahl-Hirschman index (HHI). Whether patients had 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department were the three quality outcomes assessed. Binary regression models with crossed random intercepts were constructed to estimate the impacts of the HHI on the quality of outpatient care. The intensity of nighttime lights was employed as an instrumental variable to address the endogenous relationship between the HHI and the quality of outpatient care.

RESULTS

We demonstrated that an increase in the degree of hospital competition was associated with improved quality of outpatient care. For each 1% increase in the degree of hospital competition, an individual's risk of having a 14-day follow-up encounter for influenza at any healthcare facility, outpatient facility, and hospital outpatient department fell by 34.9%, 18.3%, and 20.8%, respectively. The impacts of hospital competition on improving the quality of outpatient care were more substantial among females, individuals who used the Urban and Rural Residents Basic Medical Insurance to pay for their medical costs, individuals who visited accredited hospitals, and adults aged 25 to 64 years when compared with their counterparts.

CONCLUSION

This study demonstrated that hospital competition contributed to better quality of outpatient care under a regime with a regulated ceiling price. Competition is suggested to be promoted in the outpatient care market where hospitals have control over quality and government sets a limit on the prices that hospitals may charge.

Healthcare reform in the Netherlands: after 15 years of regulated competition

This article discusses the results and prospects of the market reform in Dutch health care which came into force in 2006. Attention is paid to the results of the health insurance reform, the experience with the shift from passive to active purchasing and the impact of the reform on healthcare provision and cost control respectively. Other topics discussed are the consequences of the reform for administrative costs, institutional trust in health insurance, and the power balance in health care after reform. The central message is that the high expectations of the market reform have not come true. Dutch health care features a high degree of hybridity and there are indications that the system is becoming ever more hybrid: the system operates much less market-like than the market frame suggests. Currently, the policy narrative on the reform is changing. Policymakers and policy documents underscore the need for cooperation in provider networks and more state direction. The Dutch experience with health care reform illustrates the pendulum theory. After a period of a belief in competition and less state direction the pendulum in policymaking swings back to a belief in cooperation and a pro-active role of the state.

Healthcare price transparency in North America and Europe

Healthcare price transparency is an effort to inform patient decision-making, but also to decrease prices and their variation across healthcare systems for equivalent medical services. The initiative is meaningful only for medical services that are shoppable-such as imaging examinations-for which patients incur out-of-pocket costs. Therefore, several countries in which patients commonly share a portion of their healthcare costs have been implementing mandates to improve healthcare price transparency. However, the provisional implementation has many issues, especially in the United States, including provider non-compliance and limited accessibility of price transparency tools by the general public. Many of the existing tools are not user-friendly, are difficult to navigate, focus on charges and health plan negotiated rates rather than patients' out-of-pocket costs, and disclose prices on the service level instead of per episode of care. As such, the disclosed amounts are often not reliable. Many price transparency tools also lack valid and measurable quality metrics, which can result in a selection of high-cost care as a proxy for high-value care, as well as an increase in healthcare prices when providers want to imply they offer high-quality care. Nevertheless, the impact of the initiatives on patients' decision-making and healthcare costs remains unclear. While transparency initiatives are patient-centric, efforts should be made to increase patient engagement, provide accurate patient-specific out-of-pocket cost information, compare available treatment and provider alternatives, and couple price information with quality metrics to enable making fully informed decisions.

Changing roles of health insurers in France, Germany, and the Netherlands: any lessons to learn from Bismarckian systems?

Bismarckian health systems are mainly governed by social health insurers, but their role, status, and power vary across countries and over time. We compare the role of health insurers in three distinct social health insurance systems in improving health systems' efficiency. In France, insurers work together as a single payer within a highly regulated context. Although this gives insurers substantial bargaining power, collective negotiations with providers are highly political and do not provide appropriate incentives for efficiency. Both Germany and the Netherlands have introduced competition among insurers to foster efficiency. However, the rationale of insurer competition in Germany is unclear because contracts are mostly concluded at a collective level and individual insurers have little power to influence health system efficiency. In the Netherlands, insurer competition is substantially more effective, but primarily focused on price and cost containment. In all three countries, the role of insurers has been transforming slowly to respond to common challenges of assuring care quality and continuity for an ageing population. To assure sustainability, they need to ensure that care providers cooperate with the same quality and efficiency objectives, but their capacity to do so has been limited by insufficient support to enforce public information on provider quality.

Reimbursement of care does not equal the distribution of hospital resources: an explorative case study on a missing link among Dutch hospitals

BACKGROUND

Affordability and accessibility of hospital care are under pressure. Research on hospital care financing focuses primarily on incentives in the financial system outside the hospital. It is notable that little is known about (incentives in) internal funding in hospitals. Therefore, our study focuses on the budget allocation in hospitals: the distribution model. Based on our hypothesis that the reimbursement and distribution models in hospitals might interact, we gain knowledge about-, and insight into, the interaction of different reimbursement and distribution models used in Dutch hospitals, and how they affect the financial output of hospital care.

METHODS

An online survey with 22 questions was conducted among financial senior management as an expert group in 49 Dutch hospitals.

RESULTS

Ultimately, 38 of 49 approached experts fully completed the survey, which amounts to 78% of the hospitals we approached and 60% of all Dutch hospitals. The results on the reimbursement model indicate price * volume with adjusted prices above a maximum cap as the most common dominant contract type. On the internal distribution model, 75-80% of the experts reported incremental budgeting as the dominant budgeting method. Results on the interaction between the reimbursement and the distribution model show that both general and specific changes in contract agreements are only partially incorporated in hospital budgets. In 28 out of 31 hospitals with self-employed medical specialists, a relation is reported between the reimbursement model and the contracts with the Medical Consultant Group(s) in which the medical specialists are united.

CONCLUSIONS

Our results in Dutch setting indicate a limited interaction between the reimbursement model and the distribution model. This lack of congruence between both models might limit the desired effects of incentives in contractual agreements aimed at the financial output. This applies to different reimbursement and distribution models. Further research into the various interactions and incentives, as visualized in our conceptual framework, could result in evidence-based advice for achieving affordable and accessible hospital care.

Improving Performance in Complex Surroundings: A Mixed Methods Evaluation of Two Hospital Strategies in the Netherlands

BACKGROUND

Hospital strategies aimed at increasing quality of care and simultaneously reducing costs show potential to improve healthcare, but knowledge on real-world effectiveness is limited. In 2014, two Dutch hospitals introduced such quality-driven strategies. Our aim was to evaluate contexts, mechanisms, and outcomes of both strategies using multiple perspectives.

METHODS

We conducted a mixed methods evaluation. Four streams of data were collected and analysed: (1) semi-structured interviewing of 62 stakeholders, such as medical doctors, nurses, managers, general practitioners (GPs), and consultants; (2) financial statements of both organisations and other hospitals in the Netherlands (counterfactual); (3) national database of quality indicators, and patient-reported experiences; and (4) existing material on strategy development and effects.

RESULTS

Both strategies resulted in a relative decrease in volume of care within the hospital, while quality of care has not been affected negatively. One hospital failed to cut operating costs sufficiently, resulting in declining profit margins. We identified six main mechanisms that impacted these outcomes: (1) Quality-improvement projects spur change and commitment; (2) increased coordination between hospital and primary care leads to substitution of care; (3) insufficient use of data and support hinder quality improvement; (4) scaling down hospital facilities is required to convert volume reductions to cost savings; (5) shared savings through global budgets lead to shared efforts between payer and hospital; and (6) financial security for physicians facilitates shift towards quality-driven care.

CONCLUSION

This integrated analysis of mixed data sources demonstrated that the institution-wide nature of the strategies has induced a shift from a focus on production towards quality of care. Longer-term (financial) sustainability of hospital strategies aimed at decelerating production growth requires significant efforts in reducing fixed costs. This strategy poses financial risks for the hospital if operating costs are insufficiently reduced or if payer alignment is compromised.

Financial risk allocation and provider incentives in hospital-insurer contracts in The Netherlands

In healthcare systems with a purchaser-provider split, contracts are an important tool to define the conditions for the provision of healthcare services. Financial risk allocation can be used in contracts as a mechanism to influence provider behavior and stimulate providers to provide efficient and high-quality care. In this paper, we provide new insights into financial risk allocation between insurers and hospitals in a changing contracting environment. We used unique nationwide data from 901 hospital-insurer contracts in The Netherlands over the years 2013, 2016, and 2018. Based on descriptive and regression analyses, we find that hospitals were exposed to more financial risk over time, although this increase was somewhat counteracted by an increasing use of risk-mitigating measures between 2016 and 2018. It is likely that this trend was heavily influenced by national cost control agreements. In addition, alternative payment models to incentivize value-based health care were rarely used and thus seemingly of lower priority, despite national policies being explicitly directed at this goal. Finally, our analysis shows that hospital and insurer market power were both negatively associated with financial risk for hospitals. This effect becomes stronger if both hospital and insurer have strong market power, which in this case may indicate a greater need to reduce (financial) uncertainties and to create more cooperative relationships.

Does competition improve hospital performance: a DEA based evaluation from the Netherlands

Many countries have introduced competition among hospitals aiming to improve their performance. We evaluate the introduction of competition among hospitals in the Netherlands over the years 2008-2015. The analysis is based on a unique longitudinal data set covering all Dutch hospitals and health insurers, as well as demographic and geographic data. We measure hospital performance using Data Envelopment Analysis and distinguish three components of competition: the fraction of freely negotiated services, market power of hospitals, and insurer bargaining power. We present new methods to define variables for each of these components which are more accurate than previously developed measures. In a multivariate regression analysis, the variables explain more than half of the variance in hospital efficiency. The results indicate that competition between hospitals and the relative fraction of freely negotiable health services are positively related to hospital efficiency. At the same time, the policy measure to steadily increase the fraction of health services contracted in competition may well have resulted in a decrease in hospital efficiency. The models show no significant association between insurer bargaining power and hospital efficiency. Altogether, the results offer little evidence that the introduction of competition for hospital care in the Netherlands has been effective.

Have Dutch Hospitals Saved Lives and Reduced Costs? A longitudinal patient-level analysis over the years 2013-2017

The purpose of this paper is to shed light on the ongoing Dutch health system reforms and identify whether hospital costs and hospital outcomes have changed over time. We present an empirical analysis that is based on granular micro-costing data and focuses on conditions for which mortality is indicative of outcome quality, that is, acute myocardial infarction (AMI), chronic heart failure (CHF), and pneumonia (PNE). We deploy a dataset of more than 80,000 inpatient episodes over 5 years (2013-2017) to estimate regression models that control for variation between patients and hospitals. We have three main findings. First, our results do not indicate significant outcome improvements over the years; that is, there is no time trend for mortality. Second, there is heterogeneity in cost developments: for patients who survive their inpatient stay, our data indicate that costs increase significantly by 0.9% per year for AMI patients, while costs decrease significantly by 1.7% per year for CHF patients and by 1.9% per year for PNE patients. For patients who pass away during their inpatient stay, our data do not indicate significant time trends. Third and finally, our results suggest the existence of substantial cost variation between hospitals.

Confronting power in low places: historical analysis of medical dominance and role-boundary negotiation between health professions in Nigeria

Introduction

Interprofessional interaction is intrinsic to health service delivery and forms the basis of task-shifting and task-sharing policies to address human resources for health challenges. But while interprofessional interaction can be collaborative, professional hierarchies and discipline-specific patterns of socialisation can result in unhealthy rivalry and conflicts which disrupt health system functioning. A better understanding of interprofessional dynamics is necessary to avoid such negative consequences. We, therefore, conducted a historical analysis of interprofessional interactions and role-boundary negotiations between health professions in Nigeria.

Methods

We conducted a review of both published and grey literature to provide historical accounts and enable policy tracing of reforms related to interprofessional interactions. We used Nancarrow and Borthwick’s typology for thematic analysis and used medical dominance and negotiated order theories to offer explanations of the conditions that facilitated or constrained interprofessional collaboration.

Results

Despite an overall context of medical dominance, we found evidence of professional power changes (dynamics) and role-boundary shifts between health professions. These shifts occurred in different directions, but shifts between professions that are at different power gradients were more likely to be non-negotiable or conflictual. Conditions that facilitated consensual role-boundary shifts included the feasibility of simultaneous upward expansion of roles for all professions and the extent to which the delegating profession was in charge of role delegation. While the introduction of new medical diagnostic technology opened up occupational vacancies which facilitated consensual role-boundary change in some cases, it constrained professional collaboration in others.

Conclusions

Health workforce governance can contribute to better functioning of health systems and voiding dysfunctional interprofessional relations if the human resource for health interventions are informed by contextual understanding (informed by comparative institutional and health systems research) of conditions that facilitate or constrain effective interprofessional collaboration.

Prices and market power in mental health care: Evidence from a major policy change in the Netherlands

In the Dutch health care system of managed competition, insurers and mental health providers negotiate on prices for mental health services. Contract prices are capped by a regulator who sets a maximum price for each mental health service. In 2013, the majority of the contract prices equaled these maximum prices. We study price setting after a major policy change in 2014. In 2014, mental health care providers had to negotiate prices with each individual health insurer separately, instead of with all insurers collectively as in 2013. Moreover, after a cost-price revision, the regulator increased in 2014 maximum prices by about 10%. Insurers and mental health providers reacted to this policy change by setting most contract prices below the new maximum prices. We find that in 2014 mental health providers with more market power, that is, a higher willingness-to-pay measure, contracted significantly higher prices. Some insurers negotiated significantly lower prices than other insurers but these differences are unrelated to an insurers' market share.

Power and Purchasing: Why Strategic Purchasing Fails

Policy Points Strategically purchasing health care has been and continues to be a popular policy idea around the world. Key asymmetries in information, market power, political power, and financial power hinder the effective implementation of strategic purchasing. Strategic purchasing has consistently failed to live up to its promises for these reasons. Future strategies based on strategic purchasing should tailor their expectations to its real effectiveness.

CONTEXT

Strategic purchasing of health care has been a popular policy idea around the world for decades, with advocates claiming that it can lead to improved quality, patient satisfaction, efficiency, accountability, and even population health. In this article, we report the results of an inquiry into the implementation and effects of strategic purchasing.

METHODS

We conducted three in-depth case studies of England, the Netherlands, and the United States. We reviewed definitions of purchasing, including its slow acquisition of adjectives such as strategic, and settled on a definition of purchasing that distinguishes it from the mere use of contracts to regulate stable interorganizational relationships. The case studies review the career of strategic purchasing in three different systems where its installation and use have been a policy priority for years.

FINDINGS

No existing health care system has effective strategic purchasing because of four key asymmetries: market power asymmetry, information asymmetry, financial asymmetry, and political power asymmetry.

CONCLUSIONS

Further investment in policies that are premised on the effectiveness of strategic purchasing, or efforts to promote it, may not be worthwhile. Instead, policymakers may need to focus on the real sources of power in a health care system. Policy for systems with existing purchasing relationships should take into account the asymmetries, ways to work with them, and the constraints that they create.

Causes of regional variation in Dutch healthcare expenditures: Evidence from movers

We assess the relative importance of demand and supply factors as determinants of regional variation in healthcare expenditures in the Netherlands. Our empirical approach follows individuals who migrate between regions. We use individual data on annual healthcare expenditures for the entire Dutch population between the years 2006 and 2013. Regional variation in healthcare expenditures is mostly driven by demand factors, with an estimated share of around 70%. The relative importance of different causes varies with the groups of regions being compared.