Regulators may be hesitant to permit price competition in healthcare markets because of its potential to damage quality. We assess whether this fear is well founded by examining a reform that permitted Dutch health insurers to freely negotiate prices with hospitals. Unlike previous research on hospital competition that has relied on quality indicators for urgent treatments, we take advantage of a plausible absence of selection bias to identify the effect on the quality of elective procedures that should be more price responsive. Using data on all admissions for hip replacements to Dutch hospitals and a difference-indifferences comparison between more and less concentrated markets, we find no evidence that price deregulation in a competitive environment reduces quality measured by hip replacement readmission rates.

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Keywords Healthcare, hospital, competition, quality, contracting
JEL Analysis of Health Care Markets (jel I11), Transactional Relationships; Contracts and Reputation; Networks (jel L14), Information and Product Quality; Standardization and Compatibility (jel L15)
Persistent URL,
Journal Journal of Health Economics
Roos, A.-F, O'Donnell, O.A, Schut, F.T, van Doorslaer, E.K.A, van Gestel, R, & Varkevisser, M. (2020). Does price deregulation in a competitive hospital market damage quality?. Journal of Health Economics. doi:10.1016/j.jhealeco.2020.102328