Marco Varkevisser

Price asymmetry in the Dutch retail gasoline market

Abstract This article analyses the retail price adjustments in the Dutch gasoline market. We estimate an asymmetric error correction model on weekly price changes for the years 1996–2001. We construct five datasets, one for each working day. The conclusions on asymmetric pricing are shown to differ over these datasets, suggesting that the choice of the day for which the prices are observed matters more than commonly believed. In our view, the insufficient robustness of the outcomes might explain the mixed conclusions found in the literature. Using these two approaches, we also show that the effect of asymmetry on the Dutch consumer costs is negligible.

Do patients choose hospitals with high quality ratings? Empirical evidence from the market for angioplasty in the Netherlands

A necessary condition for competition to promote quality in hospital markets is that patients are sensitive to differences in hospital quality. In this paper we examine the relationship between hospital quality, as measured by publicly available quality ratings, and patient hospital choice for angioplasty using individual claims data from a large health insurer. We find that Dutch patients have a high propensity to choose hospitals with a good reputation, both overall and for cardiology, and a low readmission rate after treatment for heart failure. Relative to a mean readmission rate of 8.5% we find that a 1%-point lower readmission rate is associated with a 12% increase in hospital demand. Since readmission rates are not adjusted for case-mix they may not provide a correct signal of hospital quality. Insofar patients base their hospital choice on such imperfect quality information, this may result in suboptimal choices and risk selection by hospitals.

Why do patients bypass the nearest hospital? An empirical analysis for orthopaedic care and neurosurgery in the Netherlands

Using data for 2003, we find that both for non-emergency orthopaedic care (38%) and neurosurgery (54%) numerous Dutch patients did not visit the nearest hospital. Our estimation results show that extra travel time negatively influences the probability of hospital bypassing. Good waiting time performance by the nearest hospital also significantly decreases the likelihood of a bypass decision. Patients seem to place a lower negative value on extra travel time for orthopaedic care than for neurosurgery. The valuation of shorter waiting time also varies between these two types of hospital care. A good performance of the nearest hospital on waiting time decreases the likelihood of a bypass decision most for neurosurgery. In both samples, patients are more likely to bypass the nearest hospital when it is a university medical centre or a tertiary teaching hospital. Patient attributes, such as age and social status, are also found to significantly affect hospital bypassing. From our analysis it follows that both patient and hospital care heterogeneity should be taken into account when assessing the substitutability of hospitals.

Assessing hospital competition when prices don’t matter to patients: the use of time-elasticities

Health care reforms in several European countries provide health insurers with incentives and tools to become prudent purchasers of health care. The potential success of this strategy crucially depends on insurers’ bargaining leverage vis-à-vis health care providers. An important determinant of insurers’ bargaining power is the willingness of consumers to consider alternative providers. In this paper we examine to what extent consumers are willing to switch hospitals when they are fully covered for hospital services, which is typical for many European countries. Since prices do not matter to these patients, we estimate time-elasticities to assess hospital substitutability. Using data from a large Dutch health insurer on non-emergency neurosurgical outpatient hospital visits in 2003, we estimate a conditional logit model of patient hospital choice taking both patient heterogeneity and hospital characteristics into account. We use the parameter estimates to simulate the demand effect of an artificial increase in travel time by 10% for every patient, holding all other hospital attributes constant. Overall, the resulting point estimates of hospitals’ time-elasticities are fairly high, although variation is substantial (−2.6 to −1.4). Sensitivity tests reveal that these estimates are very robust and differ significantly across individual hospitals. This implies that all hospitals in our study sample have at least one close substitute which is an important precondition for effective hospital competition.

Patient hospital choice for hip replacement: empirical evidence from the Netherlands

AbstractIn the Dutch health care system, hospitals are expected to compete. A necessary condition for competition among hospitals is that patients do not automatically choose the nearest hospital, but are—at least to some extent—sensitive to differences in hospital quality. In this study, an analysis is performed on the underlying features of patient hospital choice in a setting where prices do not matter for patients as a result of health insurance coverage. Using claims data from all Dutch hospitals over the years 2008–2010, a conditional logit model examines the relationship between patient characteristics (age, gender and reoperations) and hospital attributes (hospital quality information, waiting times on treatments and travel time for patients to the hospitals) in the market for general non-emergency hip replacement treatments. The results show that travel time is the most important determinant in patient hospital choice. From our analysis, however, it follows that publicly available hospital quality ratings and waiting times also have a significant impact on patient hospital choice. The panel data used for this study (2008–2010) is rather short, which may explain why no coherent and persistent changes in patient hospital choice behaviour over time are found.

Defining hospital markets for antitrust enforcement: new approaches and their applicability to The Netherlands.

Effective antitrust enforcement is of crucial importance for countries with a market-based health care system in which hospitals are expected to compete. Assessing hospital market power--a central issue to competition policy--is, however, complicated because the presence of third party payers and the general unobservability of prices make it difficult to apply the standard methods of market definition. Alternative, less formal methods historically employed in the hospital industry have proven inaccurate; these methods were even called inapplicable in a recent US court decision. In this paper, we discuss the strengths and weaknesses of several new approaches to defining hospital markets that are suggested in the recent economic literature. In particular, we discuss the applicability of the time-elasticity approach, competitor-share approach, and option-demand approach to the recently partly deregulated Dutch hospital market. We conclude that the appropriate approach depends crucially on how health insurers contract with hospitals and how patients select their hospital.

Pharmaceutical policy in the Netherlands: from price regulation towards managed competition.

PURPOSE To analyse the development of pharmaceutical policy in the Dutch market for outpatient prescription drugs since the early 1990s. METHODOLOGY A literature review and document analysis is performed to examine the effects of pharmaceutical policy on the performance of the Dutch market for outpatient prescription drugs since the early 1990s. FINDINGS Government efforts to control prices of pharmaceuticals were effective in constraining prices of in-patent drugs, but had an opposite effect on the prices of generic drugs. The gradual transition towards managed competition--that particularly gained momentum after the introduction of the new universal health insurance scheme in 2006--appears to be more effective in constraining prices of generic drugs than earlier government efforts to control these prices. ORIGINALITY Comparative analysis of the impact of price regulation and managed competition on generic drug prices in the Netherlands. IMPLICATIONS Implications of the changing role of health insurers are discussed for the future market for prescription drugs and role of pharmacies in the Netherlands.

Tackling hospital waiting times: The impact of past and current policies in the Netherlands

This paper reviews the impact of health policies on hospital waiting times in the Netherlands over the last two decades. During the 1990s hospital waiting times increased as a result of the introduction of fixed budgets and capacity constraints for specialists, in addition to the fixed global hospital budgets that were already in place since the 1980s. To tackle these increased waiting times over the years 2000-2011 several policies were implemented, including a change from fixed budgets to activity-based funding--for both hospitals and specialists--and increased competition among hospitals. All together these measures resulted in a strong reduction of waiting times. In 2011 mean expected waiting times for almost all surgical procedures varied from 2 to 6 weeks, well below the broadly accepted specified maximum waiting times. Hence, in the Netherlands hospital waiting times are currently not an important policy concern. Since the waiting time reduction was achieved at the expense of rapidly growing hospital costs, these have become now the primary policy concern. This has triggered the introduction of new powerful supply-side constraints in 2012, which may cause waiting times to increase for the coming years.

The impact of geographic market definition on the stringency of hospital merger control in Germany and the Netherlands

In markets where hospitals are expected to compete, preventive merger control aims to prohibit anticompetitive mergers. In the hospital industry, however, the standard method for defining the relevant market (SSNIP) is difficult to apply and alternative approaches have proven inaccurate. Experiences from the United States show that courts, by identifying overly broad geographic markets, have underestimated the anticompetitive effects of hospital mergers. We examine how geographic hospital markets are defined in Germany and the Netherlands where market-oriented reforms have created room for hospital competition. For each country, we discuss a landmark case where definition of the geographic market played a decisive role. Our findings indicate that defining geographic hospital markets in both countries is less complicated than in the United States, where antitrust analysis must take managed care organisations into account. We also find that different methods result in much more stringent hospital merger control in Germany than in the Netherlands. Given the uncertainties in defining hospital markets, the German competition authority seems to be inclined to avoid the risk of being too permissive; the opposite holds for the Dutch competition authority. We argue that for society the costs of being too permissive with regard to hospital mergers may be larger than the costs of being too stringent.

Competition policy for health care provision in the Netherlands

In the Netherlands in 2006 a major health care reform was introduced, aimed at reinforcing regulated competition in the health care sector. Health insurers were provided with strong incentives to compete and more room to negotiate and selectively contract with health care providers. Nevertheless, the bargaining position of health insurers vis-à-vis both GPs and hospitals is still relatively weak. GPs are very well organized in a powerful national interest association (LHV) and effectively exploit the long-standing trust relationship with their patients. They have been very successful in mobilizing public support against unfavorable contracting practices of health insurers and enforcement of the competition act. The rapid establishment of multidisciplinary care groups to coordinate care for patients with chronic diseases further strengthened their position. Due to ongoing horizontal consolidation, hospital markets in the Netherlands have become highly concentrated. Only recently the Dutch competition authority prohibited the first hospital merger. Despite the highly concentrated health insurance market, it is unclear whether insurers will have sufficient countervailing buyer power vis-à-vis GPs and hospitals to effectively fulfill their role as prudent buyer of care, as envisioned in the reform. To prevent further consolidation and anticompetitive coordination, strict enforcement of competition policy is crucially important for safeguarding the potential for effective insurer-provider negotiations about quality and price.