Page 193 - Effective healthcare cost containment policies Using the Netherlands as a case study - Niek W. Stadhouders

both parties. This is the potential Pareto-optimal point: neither party can be made better off without making the other party worse off.
increases the value of inclusion in the network, which increases .
In extension, bargaining can include patient volumes. Effectively, this fixes as
the collective outcome of all agreements. In case of price-times-volume-contracts, the bargaining maximization problem becomes:
Where and are set. In case of block grants, the bargaining maximization problem becomes:
Where is set and and are variable. The utility derived from remains undefined, but could be defined as the foregone profits of missing the budget agreement in the case of profit maximisation and the difference in the budget in the case of budget maximisation (non-profit providers). In the case of reimbursement bargaining, providers can respond to lower bargaining outcomes by (1) increasing the number of patients; (2) increasing treatment intensity; (3) reducing the budget. In the case of price*volume bargaining, the relevant responses to lower bargaining outcomes are (1) reducing the budget; (2) increasing treatment intensity16. In the case of block grant negotiation, providers can respond to lower bargaining outcomes by (1) reduce the number of patients; (2) reduce treatment intensity; (3) reduce the reimbursement rate. For the remainder of this paper, I
16 If bargaining is on number of patients, treatment intensity and reimbursement rate, providers have no option but to reduce the budget. If bargaining outcome is number of treatments and reimbursement rate, providers
General Discussion
Mathematically, provider bargaining surplus is the difference between provider utility of the reimbursement rate after agreement and the budget without agreement ( . The bargaining surplus for purchasers is the value of adding the provider to the network of providers ( ), relative to the cost of the reimbursement rate ( :
A reduction in the negotiated reimbursement price implies that either must increase or must decline. The bargaining maximization problem provides some relevant insights. For example, if only one payer is present, the fallback option of provider s ( ) is zero (no contract at all), while if multiple payers are present, the fallback option is the budget after negotiations with other payers, which is higher than zero. Therefore, bargaining position of providers is higher in a multi-payer market than in a single payer market. Furthermore, concentration on the payer side increases the disutility of not having a fallback option for providers, which reduces , while concentration at the provider side
have the option to substitute the number of patients and treatment intensity within the set budget.
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