Competition and quality in a physiotherapy market with fixed prices

Our study focuses on competition and quality in physiotherapy organized and regulated by the Social Insurance Institution of Finland (Kela). We first derive a hypothesis with a theoretical model and then perform empirical analyses of the data. Within the physiotherapy market, prices are regulated by Kela, and after registration eligible firms are accepted to join a pool of firms from which patients choose service providers based on their individual preferences. By using 2SLS estimation techniques, we analyzed the relationship among quality, competition and regulated price. According to the results, competition has a statistically significant (yet weak) negative effect (p = 0.019) on quality. The outcome for quality is likely caused by imperfect information. It seems that Kela has provided too little information for patients about the quality of the service.     

Value‐Based Differential Pricing: Efficient Prices for Drugs in a Global Context

This paper analyzes pharmaceutical pricing between and within countries to achieve second‐best static and dynamic efficiency. We distinguish countries with and without universal insurance, because insurance undermines patients' price sensitivity, potentially leading to prices above second‐best efficient levels. In countries with universal insurance, if each payer unilaterally sets an incremental cost‐effectiveness ratio (ICER) threshold based on its citizens' willingness‐to‐pay for health; manufacturers price to that ICER threshold; and payers limit reimbursement to patients for whom a drug is cost‐effective at that price and ICER, then the resulting price levels and use within each country and price differentials across countries are roughly consistent with second‐best static and dynamic efficiency. These value‐based prices are expected to differ cross‐nationally with per capita income and be broadly consistent with Ramsey optimal prices. Countries without comprehensive insurance avoid its distorting effects on prices but also lack financial protection and affordability for the poor. Improving pricing efficiency in these self‐pay countries includes improving regulation and consumer information about product quality and enabling firms to price discriminate within and between countries. © 2013 The Authors. Health Economics published by John Wiley & Sons Ltd.     

Medical service provider networks

In many countries, health insurers or health plans choose to contract either with any willing providers or with preferred providers. We compare these mechanisms when two medical services are imperfect substitutes in demand and are supplied by two different firms. In both cases, the reimbursement is higher when patients select the in‐network provider(s). We show that these mechanisms yield lower prices, lower providers' and insurer's profits, and lower expense than in the uniform‐reimbursement case. Whatever the degree of product differentiation, a not‐for‐profit insurer should prefer selective contracting and select a reimbursement such that the out‐of‐pocket expense is null. Although all providers join the network under any‐willing‐provider contracting in the absence of third‐party payment, an asymmetric equilibrium may exist when this billing arrangement is implemented.     

How important is price variation between health insurers?

Prices negotiated between payers and providers affect a health insurance contract's value via enrollees’ cost-sharing and self-insured employers’ costs. However, price variation across payers is difficult to observe. We measure negotiated prices for hospital-payer pairs in Massachusetts and characterize price variation. Between-payer price variation is similar in magnitude to between-hospital price variation. Administrative-services-only contracts, in which insurers do not bear risk, have higher prices. We model negotiation incentives and show that contractual form and demand responsiveness to negotiated prices are important determinants of negotiated prices.     

武汉市医疗服务项目价格横向比较研究*

目的：通过比较武汉与国内其他9个同类型城市三级医疗机构的医疗服务项目价格,了解武汉定价水平,并为其价格调整提供依据。方法：利用武汉医疗服务项目收费频次构建权重,计算加权平均价格比较总体价格水平;对综合医疗服务、医技诊疗、临床诊疗、中医及传统民族医诊疗4个大类分别进行比较。结果：武汉现行医疗服务定价整体处于各地区中上水平,各别手术类项目定价显著高于平均水平,综合医疗服务类、医技诊疗类项目定价偏低。且各地医疗服务项目价格与人均可支配收入不相关。结论：医疗服务项目定价需要测算其的成本与价值,并增加对于疾病诊断组价格的监测;构建区域医疗服务价格监测指标,例如价格指数,建立规范的信息系统。     

Costing and competition

Working for patients established a new system of contracts between providers and purchasers of healthcare, with prices based on full costs, avoiding cross-subsidization. The new regime necessitates greatly improved costing systems, to improve the efficiency of service provision by creating price competition between providers. Ken Bates and Stan Brignall argue that non-price competition also occurs, with providers 'differentiating' on quality of service/product, flexibility or innovation.     

Making markets work for disability services: The question of price setting

Personalisation schemes and associated markets for social care have been a growing trend in industrialised countries over recent decades. While there is no single approach to marketisation of social care and personalisation, often funds are devolved to clients of care services to be used to purchase services directly from market. Such arrangements are vulnerable to market failures and ‘thin’ markets, causing the need for stewardship of the social care markets. We present findings from a 2018 survey of 626 care service providers in the Australian National Disability Insurance Scheme market on their experience of market conditions. Over 46% of respondents listed ‘addressing pricing’ as their top action for addressing market problems. Qualitative findings show that central price setting is detached from service delivery realities, affecting service quality and capability building potential. We argue that devolution of price setting to, or at least flexibility and discretion at, the local level is likely to be a key to solving pricing dilemmas in personalisation schemes.     

The heterogeneity of markets for drugs in Europe

The cost of distribution of drugs in European countries is one of the factors causing differences in prices among countries. Twenty countries are analyzed, to demonstrate the differential impact of margins paid to distributors. In most cases, distribution channels include two intermediaries, a wholesaler-distributor and a pharmacist. Three models can be observed: a fixed margin in percentage, either on the ex factory price, or on the public price; a regressive margin model, with more or less complex formulas; and a loosely regulated model, within which the revenue of each actor is set by market competition under a global cap on the difference between ex factory prices and public prices. The multiplicative coefficient varies between 1.14 and 2.44 according to countries and to models. The prices in different countries of three drugs, omeprazole, setraline and ramipril were studied. The cost of distribution tends to increase the variability of the public price, when compared to the variability of ex factory prices. This may explain a part of the often observed difference in cost-effectiveness of a treatment across countries. The efficiency of distribution is also an important factor of the efficiency in health care services     

The heterogeneity of markets for drugs in Europe

The cost of distribution of drugs in European countries is one of the factors causing differences in prices among countries. Twenty countries are analyzed, to demonstrate the differential impact of margins paid to distributors. In most cases, distribution channels include two intermediaries, a wholesaler-distributor and a pharmacist. Three models can be observed: a fixed margin in percentage, either on the ex factory price, or on the public price; a regressive margin model, with more or less complex formulas; and a loosely regulated model, within which the revenue of each actor is set by market competition under a global cap on the difference between ex factory prices and public prices. The multiplicative coefficient varies between 1.14 and 2.44 according to countries and to models. The prices in different countries of three drugs, omeprazole, setraline and ramipril were studied. The cost of distribution tends to increase the variability of the public price, when compared to the variability of ex factory prices. This may explain a part of the often observed difference in cost-effectiveness of a treatment across countries. The efficiency of distribution is also an important factor of the efficiency in health care services     

Does Competition Have an Effect on Price and Quality in Physiotherapy?

We estimate the effect of competition on quality and prices in physiotherapy organised and financed by the Social Insurance Institution of Finland for disabled individuals. Within the physiotherapy market, firms participate in competitive bidding, prices are determined by the market, services are free at the point of use and firms are allowed to react to patient choice only by enhancing quality. Firm‐level data (n = 854) regarding quality and price were analysed. Using 2SLS estimation techniques, we analysed the relationship between quality and competition, and price and competition. Our study found that competition has a negative (yet weak) effect on quality. Prices on the other hand are not affected by competition. The result is likely caused by imperfect information, because it seems that the Social Insurance Institution of Finland has provided too little information for patients to make adequate choices about proper service providers. We argue that by publishing quality information, it is possible to ease the decision‐making of patients and influence the quality strategies of firms active in the physiotherapy market. Moreover, we found that competition appeared as an exogenous variable in this study. Copyright © 2016 John Wiley & Sons, Ltd.     

On the bright side of market concentration in a mixed-oligopoly healthcare industry

We describe the healthcare industry as a mixed oligopoly, where a public and two private providers compete, and examine the effects of a merger between the two private healthcare providers on prices, quality, and welfare. When the price and (eventually) quality of the public provider are regulated, the cost synergies required for the merger to increase consumer welfare are less significant than in a setting with only profit-maximizing providers. When, instead, the public provider can adjust its policy to the rivals’ behavior and maximizes a weighted sum of profits and consumer surplus (i.e., it has ‘semi-altruistic’ preferences), the merger is consumer surplus increasing if the public provider is sufficiently altruist, in some cases even absent efficiencies. These results suggest that ignoring the role and objectives of the public sector in the healthcare industry may lead agencies to reject mergers that, while would decrease consumer welfare in fully privatized industries, would increase it in mixed oligopolies.     

International prices and availability of pharmaceuticals in 2005

This paper compares pharmaceutical spending, availability, use, and prices in twelve countries in 2005. Drug spending per capita was higher in the United States than in other countries. The United States had relatively high use of new drugs and high-strength formulations; other countries used more of older drugs and weaker formulations. Thus, whether U.S. overall volume of use is lower or higher depends on the measure of volume and type of product. Comprehensive price indexes show foreign prices to be 20-40 percent lower than U.S. manufacturer prices, but only 10-30 percent lower than U.S. public prices. Generics are cheaper in the United States than in other countries.     

The impact of the introduction of user fees at a district hospital in Cambodia

Proponents of user fees in the health sector in poor countries cite a number of often interrelated rationales, relating inter alia to cost recovery, improved equity and greater efficiency. Opponents argue that dramatic and sustained decreases in service utilization follow the introduction of user fees, highlighting evidence that user fees reduce service utilization when they fail to result in improved quality of care and/or when services are priced higher than those charged by private health care providers. Utilization of public health services in Cambodia is low. Supply-side factors are significant determinants of such low public sector utilization, including low official salaries of service providers (forcing many to seek additional income in the private sector), and operations budgets which are erratic and often insufficient to cover running costs of service delivery outlets. The Cambodia Ministry of Health (MOH) encourages user fee schemes at operational district level. By allowing revenue to be retained at the health facility level, the MOH aims to improve health care delivery--and consequently service utilization--through increased salaries to health facility staff and increases in operations budgets. This case study of the introduction of user fees at a district referral hospital in Kirivong Operational District in Cambodia, using the findings from empirical research, examines the impact of user fees on health-careseeking behaviour, ability to pay and consultation prices at private practitioners. The research showed that consultation fees charged by private providers increased in tandem with price increases introduced at the referral hospital. It further demonstrates--for the first time that we are aware of from the available literature--that the introduction and subsequent increase in user fees created a 'medical poverty trap', which has significant health and livelihood impact (including untreated morbidity and long-term impoverishment). Addressing the medical poverty trap will require two interventions to be implemented immediately: regulation of the private sector, and reimbursing health facilities for services provided to patients who are exempted from paying user fees because of poverty. A third, longer-term initiative is also suggested: the establishment of a social health insurance mechanism.     

THE DETERMINANTS OF PRICING IN PHARMACEUTICALS: ARE US PRICES REALLY SO HIGH?

This paper studies price determination in pharmaceutical markets using data for 25 countries, 6 years, and a comprehensive list of products from the MIDAS IMS database. A key finding is that the USA has prices that are not significantly higher than those of countries with similar income levels, especially those that are ‘lightly regulated’. More importantly, price differences to the US levels increase for ‘branded’, world top selling, or innovative products, and decrease, regardless of the level of regulation for mature or widely diffused molecules. Because prices for top selling molecules may be easier to perceive and recollect and more important for companies, they may bias the public discussion about international price differences. Copyright © 2013 John Wiley & Sons, Ltd.     

Payment reform in the United States.

Concern over rising health care costs has prompted dramatic reform in the United States health care financing system. The United States is moving from a period where providers determined prices into a period where payors set prices; and in certain locations into a period where prices are set by providers, and consumers choose among providers based on price and other factors. Also presented is an analysis of the interrelated events that brought about the changes. Among the factors are the oversupply of physicians and other providers the improvement of case-mix measures and other measures of hospital output, and the political climate toward payment reform. The paper concludes with specific lessons for other countries.     

Cigarette purchasing behaviour in Thailand and Malaysia: Comparative analysis of a semi-monopolistic and a free-market structure

Abstract

A wide range of cigarette prices can undermine the impact of tobacco tax policy when smokers switch to cheaper cigarettes instead of quitting. In order to better understand this behaviour, we study socio-economic determinants of price/brand choices in two different markets: a semi-monopolistic market in Thailand and a competitive market in Malaysia. The hypothesis that the factors affecting the price/brand choice are different in these two markets is analysed by employing a 2005 survey among smokers. This survey provides a unique perspective on market characteristics usually described only in business reports by the tobacco industry.

We found that smokers in Thailand have fewer opportunities to trade down to save money on cigarettes, but pay lower prices than smokers in Malaysia, despite Thailand's higher tax rate. The Malaysian market, on the other hand, offers many possibilities to shop around for cheaper cigarettes. Higher income and education increase the price paid per cigarette in both countries, but the impact of these factors is larger in Malaysia. This has implications for sensitivity to cigarette prices. Using tax policy alone should be a more effective tobacco control measure in Thailand as compared to Malaysia. The effectiveness of a tax increase in Malaysia can be improved by adding programmes focusing on smoking cessation among low-income/low-educated smokers.     

Price adjustment in the hospital sector

We analyse the properties of optimal price adjustment to hospitals when no lump-sum transfers are allowed and when prices differ to reflect observable exogenous differences in costs. We find that: (a) when the marginal benefit from treatment is decreasing and the cost function is the power function, price adjustment for hospitals with higher costs is positive but partial; if the marginal benefit is constant, the price is identical across providers; (b) if the cost function is exponential or it is separable in monetary and non-monetary costs (and linear in monetary costs), price adjustment is positive even when the marginal benefit is constant; (c) higher inequality aversion of the purchaser increases concentration in prices and lowers concentration in quantities; (d) if some dimensions of costs are private information, a higher correlation between the observable and unobservable cost component increases the optimal price for providers whose observable costs are above the average.     

What Happens to Patterns of Food Consumption when Food Prices Change? Evidence from A Systematic Review and Meta‐Analysis of Food Price Elasticities Globally

Recent years have seen considerable interest in examining the impact of food prices on food consumption and subsequent health consequences. Fiscal policies targeting the relative price of unhealthy foods are frequently put forward as ways to address the obesity epidemic. Conversely, various food subsidy interventions are used in attempts to reduce levels of under‐nutrition. Information on price elasticities is essential for understanding how such changes in food prices affect food consumption. It is crucial to know not only own‐price elasticities but also cross‐price elasticities, as food substitution patterns may have significant implications for policy recommendations. While own‐price elasticities are common in analyses of the impact of food price changes on health, cross‐price effects, even though generally acknowledged, are much less frequently included in analyses, especially in the public health literature. This article systematically reviews the global evidence on cross‐price elasticities and provides combined estimates for seven food groups in low‐income, middle‐income and high‐income countries alongside previously estimated own‐price elasticities. Changes in food prices had the largest own‐price effects in low‐income countries. Cross‐price effects were more varied and depending on country income level were found to be reinforcing, undermining or alleviating own‐price effects. Copyright © 2014 John Wiley & Sons, Ltd.     

Do hospitals respond to decreasing prices by supplying more services?

Regulated prices are common in markets for medical care. We estimate the effect of changes in regulated reimbursement prices on volume of hospital care based on a reform of hospital financing in Germany. Uniquely, this reform changed the overall level of reimbursement—with increasing prices for some hospitals and decreasing prices for others—without directly affecting the relative prices for different groups of patients or types of treatment. Based on administrative data, we find that hospitals react to increasing prices by decreasing the service supply and to decreasing prices by increasing the service supply. Moreover, we find some evidence that volume changes for hospitals with different price changes are nonlinear. We interpret our findings as evidence for a negative income effect of prices on volume of care.