How does managed competition affect hospital prices in a social health insurance system? The Colombian case.

Abstract

This paper studies the effect on hospital service prices of a health system reform that allows managed selective contracting and regulation as a means for efficiency and price competition. Cross-sectional data about prices and market structure were analysed from a pool of 20 markets which includes 15 million Colombians. A multilevel regression method comparing three different market settings was performed. The analysis evaluates the effects of insurer choice, hospital quality and market characteristics using a nationwide health services transactional database. A Hirshmann-Herfindahl index was applied to evaluate the markets concentration. Among the results, bilateral monopolies were made evident, both in insurance and hospital markets. Insurer selective contracting policy has the greatest impact on pricing with hospital monopoly heavy effect on health service prices. Colombian government has a challenge in regulating managed competition in order to maintain competition and access to healthcare. Health reforms using market competition as a mechanism for efficiency should follow closely health services market evolution in order to introduce effective regulatory policies.