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Bureaucracy Versus Markets in Hospital Care: The Dutch Case

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  • Janssen, Richard T J M
  • Leers, Theo
  • Meijdam, Lex C.
  • Verbon, Harrie

Abstract

In this paper we analyze the bureaucratic negotiation process that is implied by the budgeting system applied in Dutch hospital care. This system is based on centralized price setting while simultaneously allowing for decentralized negotiations on volumes. We apply a variant of the bureaucracy theory, according to which the bureaucratic agency (in our case the joint hospitals) are not allowed to price discriminate, but will receive a flat price per unit of output. We find that central price setting, where the insurer cannot exploit its information on hospital costs, leads to a suboptimal supply of hospital care. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Janssen, Richard T J M & Leers, Theo & Meijdam, Lex C. & Verbon, Harrie, 2003. "Bureaucracy Versus Markets in Hospital Care: The Dutch Case," Public Choice, Springer, vol. 114(3-4), pages 477-489, March.
    • Handle: RePEc:kap:pubcho:v:114:y:2003:i:3-4:p:477-89
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    Cited by:

    1. Silvia Fedeli & Leone Leonida & Michele Santoni, 2018. "Bureaucratic institutional design: the case of the Italian NHS," Public Choice, Springer, vol. 177(3), pages 265-285, December.
    2. Elton Beqiraj & Silvia Fedeli & Massimiliano Tancioni, 2019. "Bureaucratic Reshuffling and Efficiency: Do n-Competing Bureaus Determine Inefficient Results?," Mathematics, MDPI, vol. 7(10), pages 1-12, October.

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