Abstract
Abstract The case for competition in health-care markets rests on economic models in which providers seek to maximize profits. However, little is known regarding how public health-care providers, who might not have a profit motive, react to increased competition from private providers. This study considers the heterogeneous effects of a primary health-care reform in a Swedish region that considerably loosened entry restrictions and increased patients’ freedom of choice, thus enabling increased competition. Our difference-in-differences analysis contrasts local markets that were affected by both entry and choice with local monopoly markets, which were unaffected by the reforms. Using detailed administrative data on all visits to public health centers in 2008–2011, we find that providers in markets with increasing competition registered more diagnoses in an administrative database, thus increasing their reimbursement per patient. Although the economic significance of the effect is small, the result suggests that public providers are indeed sensitive to competition.
Highlights
Dissatisfaction with the performance of public healthcare services has led to political interest in policies that promote competition in many countries (Gaynor et al, 2015)
The results suggest that since the reform, health centers in competitive markets have increased the number of registered diagnoses by almost 0.05 more than health centers in non-competitive markets
For a health center of average size in May 2009, i.e., with 9,925 listed patients, each of whom brought an average capitation of 190 SEK, the increase in revenue following the increase in registrations would cover the loss of 15 listed patients
Summary
Dissatisfaction with the performance of public healthcare services has led to political interest in policies that promote competition in many countries (Gaynor et al, 2015). Using a unique dataset containing all visits to public group practices ( denoted “health centers”) between 2008 and 2011 by working age adults, we examine if the number of registered diagnoses per visit increased more for patients visiting health centers subject to increased competition due to the reform. 1 Arguably, the public health centers in Skåne operate in a soft budget constraint environment. Their owner – the regional government – has the authority to raise taxes and take up loans that may be viewed as implicitly guaranteed by the national government (von Hagen and Dahlberg, 2004); the region can cross-subsidize its own providers (Konkurrensverket, 2014).
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