Abstract
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.
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Acknowledgments
The authors thank Paul van der Geest, Wynand van de Ven, Pinar Karaca-Mandic, and two anonymous reviewers for their helpful comments and suggestions. They also gratefully acknowledge Agis for providing the data.
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Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.
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Varkevisser, M., van der Geest, S.A. & Schut, F.T. Assessing hospital competition when prices don’t matter to patients: the use of time-elasticities. Int J Health Care Finance Econ 10, 43–60 (2010). https://doi.org/10.1007/s10754-009-9070-6
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DOI: https://doi.org/10.1007/s10754-009-9070-6