Page 118 - Effective healthcare cost containment policies Using the Netherlands as a case study - Niek W. Stadhouders

Chapter 5
entry and exit, provider concentration, capital intensity and out-patient settings, finding that these factors have minor influence on volatility. However, additional factors, specifically shifts in financing arrangements, renovations and socio-demographic trends, may also increase volatility irrespective of active purchasing. Therefore, our measure of market volatility overestimates the influence of active purchasing on market share reallocations. On the other hand, active purchasing may constitute actions that do not result in market share reallocations. The high extent of selective contracting suggests that insurers may aim to concentrate specific types of care and reduce other types of care within a hospital, without affecting the total budget. Furthermore, active purchasing may focus on cost containment, aiming to reduce growth in all provider budgets. If cost containment does not distinguish between providers, no market shares are reallocated as a result of active purchasing.
While the MVI may be used to compare health systems on active purchasing, the optimal level of market share reallocations is unknown. Volatility is necessary to accommodate changes and improve efficiency, but too high market volatility is likely to risk provider continuity. Furthermore, high market volatility does not necessarily imply that reallocations improve efficiency, i.e. are moving in the direction from low-quality providers to high quality providers. Literature on the effects of quality differences on prices, volumes or market share, finds mixed results (Baker et al., 2003; Chandra et al., 2016; Mukamel and Mushlin, 1998; Rosenthal and Frank, 2006; Werner and Asch, 2005). Furthermore, it generally tends to be unclear whether active purchasing or patient choice drives these results (Werner and Asch, 2005). In order to research whether active purchasing leads to a more efficient allocation of resources, quality of providers should be taken into account. However, currently few valid quality indicators are publicly available for the Netherlands. Due to these limitations, market volatility should be interpreted as a proxy for active purchasing by reallocations of market share, acknowledging that other forms of active purchasing are not taken into account.
One major outcome is that in the hospital sector, volatility is relatively low, which may question the premise that managed competition incentivises insurers to improve efficiency in the hospital market by selectively contracting high-quality providers. Several explanations may be given for the low MVI in the hospital sector. Budget increases require sufficient potential to increase capacity, while budget reductions require adjustments of hospital expenditures, e.g. changes in personnel or capital expenditures. The expenditure side might be relatively fixed, so large changes in the budget might risk provider continuity. This may form a barrier for active purchasing in the hospital market.
110
5.5.2. Policy implications