A Transaction Cost Analysis of Dutch Hospital Care Contracting between hospitals and health insurance companies in a deregulated environment

The Dutch government has started a process of reformation in the Dutch healthcare. The goal of this reformation is cost efficient healthcare in the Netherlands. Hospitals and health insurance companies in the Netherlands experience changes in regulations and funding. They are expected to negotiate about the price and quantities of hospital care. A product-price system for hospital care, called DBC, has been introduced by the government to support these negotiations. This study shows that transactions between hospitals and health insurance companies are not coordinated efficiently. Hospitals and health insurance companies are looking for more cost efficient ways to coordinate their transactions and organise their contracting process in a deregulated environment. Their experience is limited to the regulated hybrid contracting process. Scientific research on this topic is limited which supports the added value of this study with the next aim: Formulate recommendations for the management of hospitals and the management of health insurance companies and policy makers, in order to (re) align the transactions between hospitals and health insurance companies with an efficient governance structure in a more market oriented, deregulated, environment. In this study Transaction Cost Economics (TCE) is used to describe and analyse the transactions between hospitals and health insurance companies and to develop recommendations for an efficient governance structure in a deregulated environment. TCE is concerned with efficient governance structures for transactions. Williamson (1996, p. 46) describes as the main hypothesis of transaction cost economics: “align transactions (which differ in their attributes) with governance structures (which differ in their costs and competencies) in a discriminating (mainly transaction cost economising) way.” TCE features three generic clusters of governance which can be used to coordinate transactions: (1) markets, (2) hierarchies and (3) hybrids.