Regional regulators in healthcare service under quality competition: A game theoretical model

Bisceglia, Michele and Cellini, Roberto and Grilli, Luca (2017): Regional regulators in healthcare service under quality competition: A game theoretical model.

Abstract

In several countries, healthcare services are provided by public and/or private subjects, and they are reimbursed by the Government, on the basis of regulated prices. Thus, providers take prices as given and compete on quality to attract patients. In some countries, regulated prices differ across regions. This paper focuses on the interdependence between regional regulators within a country: it proposes a model of spatial competition to study how price-setters of different regions interact, in a simple but realistic framework. We show that the decentralisation of price regulation implies higher expenditure, but higher patients' welfare.

• Item Type: MPRA Paper
• Language: English
• Keywords: Healthcare Services; Diagnosis Related Group; 2-Stage Non Cooperative Game; Quality Competition.
• Subjects: H - Public Economics > H4 - Publicly Provided Goods > H42 - Publicly Provided Private Goods; I - Health, Education, and Welfare > I1 - Health > I11 - Analysis of Health Care Markets; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R38 - Government Policy

References

[1] Aiura H (2016), The effect of cross-border healthcare on quality, public health insurance, and income redistribution, Institute for Sammfunsokonomi Working Paper 4/2016 (SSRN wp 2766847).

[2] Balia S, Brau R, Marroccu E (2014), What drives patient mobility across Italian regions? Evidence from hospital discharge data, Development in Health Economics and Public Policitcs 12: 133-54.

[3] Bech M, Christiansen T, Dunham K, Lauridsen J, Lyttkens CH, McDonald K, et al. (2009), The influence of economic incentives and regulatory factors on the adoption of treatment technologies: a case study of technologies used to treat heart attacks, Health Economics 18: 1114-32.

[4] Bokhari F (2009), Managed care competition and the adoption of hospital technology: the case of cardiac catherization, International Journal of Industrial Organization 27: 223-37.

[5] Brekke K, Cellini R, Siciliani L, Straume O R (2010), Competition and quality in health care markets: A differential game approach , Journal of Health Economics, 29: 508-523.

[6] Brekke K, Siciliani L, Straume O R (2011), Hospital competition and quality with regulated prices, The Scandinavian Journal of Economics, 113: 444-469.

[7] Brekke K, Cellini R, Siciliani L, Straume O R (2012), Competition in regulated markets with sluggish beliefs about quality, Journal of Economics & Management Strategy, 21: 131-178.

[8] Brekke K, Levaggi R, Siciliani L, Straume O R (2014), Patient mobility, healthcare quality and welfare, Journal of Economic Behavior & Organization, 105: 140-57.

[9] Brekke K, Levaggi R, Siciliani L, Straume O R (2016), Patient mobility and health care quality when regions and patients differ in income, Journal of Health Economics, 50: 372-87.

[10] Busse R, Geissler A, Quentin W, Wiley M (Eds.) (2001), Diagnosis-related groups in Europe: moving towards transparency, effciency and quality in hospitals, European Observatory on Health System and Policies Series. Maidenhead, UK: Open University Press - McGraw Hill.

[11] Cantù E, Carbone C, Anessi Pessina E (2001), Do Italian regions effectively use DRG funding to steer provider behavior?, in: Ongaro E, Massey A,Holzer M, Wayenberg E (Eds.). Policy, performance and management in governance and intergovernmental relations: transatlantic perspectives. Cheltenham, UK: Edward Elgar Publishing, p. 341-59.

[12] Cavalieri M, Gitto L, Guccio C (2013), Reimbursement systems and quality of hospital care: An empirical analysis for Italy, Health Policy 111: 273-89.

[13] Cavalieri M, Guccio C, Lisi D, Pignataro G (2016), Does the extent of per case payment system affect hospital effciency? Evidence from the Italian NHS, Public Finance Review, DOI: 10.1177/1091142116651487.

[14] Cellini R, Lamantia F (2016), Quality competition in markets with regulated prices and minimum quality standards, Journal of Evolutionary Economics 25: 345-70.

[15] Cellini R, Siciliani L, Straume O R (2015), A dynamic model of quality competition with endogenous prices, NIPE, Universidade do Minho.

[16] Culyer A J, Newhouse J P (Eds) (2000), Handbook of health economics. Volume 1, Part A, Amsterdam: Elsevier.

[17] Ellis R P, McGuire T (1986), Provider behavior under prospective reimbursement: Cost sharing and supply, Journal of Health Economics, 5: 129-51.

[18] Ellis R P, Miller M (2008), Provider payment methods and incentives, in Heggenhougen K (Ed.) International Encyclopedia of Public Health. San Diego, CA: Academic Press - Elsevier, p. 395-402.

[19] Finocchiaro Castro M, Guccio C, Pignataro G, Rizzo I (2014), The effects of reimbursement mechanisms on medical technology diffusion in the hospital sector in the Italian NHS, Health Policy 115: 215-29.

[20] Folland S, Goodman A C, Stano M (2004), The economics of health and health care. Upper Saddle River, NJ: Prentice Hall.

[21] Gravelle H, Scott A, Sivey P, Yong J, 2016. Competition, price and quality in the market for physician consultations, Journal of Industrial Economics 64: 135-69.

[22] Hamoudi H, Risueno M (2012), The effect of zoning in spatial competition, Journal of Regional Sciences 52: 361-74.

[23] Kanbur R, Keen M (1993), Jeux sans frontieres: tax competition and tax coordination when countries differ in size, American Economic Review 83: 877-92.

[24] Ishida J, Matsushima N (2004), A Noncooperative Analysis of a Circular City Model Regional Science and Urban Economics 34: 575-589.

[25] Levaggi R, Moretto M, Pertile P (2012), Static and dynamic effciency of irreversible health care investments under alternative payment rules, Journal of Health Economics 31: 169-79.

[26] Levaggi R, Moretto M, Pertile P (2014), Two-part payments for the reimbursement of investments in health technologies, Health Policy 115: 230-36.

[27] Ma A, Burgess J (1993), Quality competition, welfare, and regulation, Journal of Economics 58: 153-73.

[28] Ma A (1994) Health care payment systems: Cost and quality incentives, Journal of Economics and Management Strategy 3: 93-112.

[29] Mikkala H, Keskimaki I, Hakkinene U (2002), DRG related prices applied in a public health care system: Can Finland learn form Norway and Sweden? Health Policy 59: 37-51.

[30] Miraldo, M., Siciliani, L., Street, A., 2011. Price adjustment in the hospital sector, Journal of Health Economics 30: 112{125.

[31] Moreno Serra R, Wagstaff A (2010), System-wide impacts of hospital payment reforms: evidence from Central and Eastern Europe and Central Asia, Journal of Health Economics 29: 585-602.

[32] Pauli M, McGuire T, Barros P (2011), Handbook of health economics. Volume 2 . Amsterdam: Elsevier.

[33] Romeo A A, Wagner J L, Lee R H (1984), Prospective reimbursement and the diffusion of new technologies in hospitals, Journal of Health Economics 3: 1-24.

[34] Rosenmoller M, McKee M, Baeten R (Eds) (2004), Patient mobility in the European Union: Learning from experience, Bruxelles: The European Observatory on Health Systems and Policies.

[35] Salop S C (1979), Monopolistic competition with outside goods, Bell Journal of Economics 10: 141-56.

[36] Schreyoegg J, Stargardt T, Tiemann O, Busse R (2006), Methods to determine reimbursement rate for DRG: A comparison of nine European countries, Healthcare Management 9: 215-23.

[37] Siciliani L, Straume O R, Cellini R (2013), Quality competition with motivated providers and sluggish demand, Journal of Economic Dynamics & Control 37: 2041-61.

[38] Street A, O'Reilly J, Ward P, Mason A (2011), DRG based hospital payment and effciency: Theory, evidence and challenges, in Busse R, Geissler A, Quentin W, Wiley M (Eds.) Diagnosis related groups in Europe: Moving towards transparency, efficiency and quality in hospitals. Maidenhead, UK: Open University Press, p. 93-114.

[39] Weber E, 2014. Measuring welfare from ambulatory surgery centers: A spatial analysis of demand for health care facilities, Journal of Industrial Economics 62: 591-631.