Abstract
Low profitability has been responsible for the insolvency of a large number of health plan operators (HPO) in recent years, which increasingly requires these entities to assess which services can be optimized without compromising their final activities. An answer to this problem may lie in the adequate dimensioning of support activities. Therefore, the aim of this study is to investigate the economies of scale in the support activities of Brazilian HPO. In the presence of such economies, it can be considered that operators have room to dilute their administrative expenses, suggesting that profitability can be increased without the need for large price increases, which can guarantee the survival of companies in the sector without penalizing their customers. For this purpose, panel data regressions with Random Effects (RE), Fixed Effects (FE) and pooled were estimated, considering 5,185 observations for the period 2011 – 2018. The results found by estimating the total cost function were favorable to the hypothesis of economies of scale in the supplementary health sector. Finally, it was also possible to verify that the type of operator and the geographic location of the administrative headquarters of these entities contribute to the scale effect to a greater or lesser extent. These results show that the economies of scale existing in the sector can significantly contribute to the operational and financial maintenance of various HPO, providing an alternative to mitigate the low profitability of these companies.
Highlights
The Brazilian supplementary health sector brings together the health plan operators (HPO), which provide care to their beneficiary clients through accredited providers of medical, hospital, outpatient, laboratory and related services, as individuals or legal entities (Sancovschi, Macedo & Silva, 2014).According to data from the National Agency for Supplementary Health (ANS), the aforesaid industry had 47.6 million users at the end of 2020, served by 702 operators, distributed among all Brazilian regions, which were responsible for a total consolidated revenue of around R$ 238.3 billion and a net profit of almost R$ 17.6 billion (ANS, 2021a)
These results show that the economies of scale existing in the sector can significantly contribute to the operational and financial maintenance of various HPO, providing an alternative to mitigate the low profitability of these companies
In the presence of such economies, one can consider that the operators have room to dilute their administrative expenses, showing that profitability can be increased without the need for large increases in prices, which can ensure the survival of companies in the sector without penalizing their clients
Summary
The Brazilian supplementary health sector brings together the health plan operators (HPO), which provide care to their beneficiary clients through accredited providers of medical, hospital, outpatient, laboratory and related services, as individuals or legal entities (Sancovschi, Macedo & Silva, 2014). This research is relevant because, as the supplementary health sector is characterized by low profitability (Araújo & Silva, 2018), organizational restructuring of the HPO support activities can help them improve their results, mitigating insolvency situations and the risks related to the operational continuity of the business, which benefits employees, clients, suppliers and a whole range of service providers In this sense, it is important to note that investigations on economies of scale in private health operators have already been carried out in other markets, mainly the American and British ones, as in Bernet and Singh (2015), Born, Hughen and Sirmans (2020) and Freeman, Savva and Scholes (2020). Economies of Scale in Brazilian Supplementary Health: An Alternative Path to Expand Profitability their administrative headquarters (economic agglomerations), it is possible to argue that the Brazilian supplementary health sector presents evidence of economies of scale in its administrative activities, indicating that the rational use of idleness in the support activities can benefit the operators and their clients, improving the profitability of the former and mitigating or even eliminating the need for price adjustments above inflation for the latter
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
