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Competition and quality in a physiotherapy market with fixed prices

Author

Listed:
  • Piia Pekola

    (Social Insurance Institution of Finland)

  • Ismo Linnosmaa

    (National Institute for Health and Welfare)

  • Hennamari Mikkola

    (Social Insurance Institution of Finland)

Abstract

Our study focuses on competition and quality in physiotherapy organized and regulated by the Social Insurance Institution of Finland (Kela). We first derive a hypothesis with a theoretical model and then perform empirical analyses of the data. Within the physiotherapy market, prices are regulated by Kela, and after registration eligible firms are accepted to join a pool of firms from which patients choose service providers based on their individual preferences. By using 2SLS estimation techniques, we analyzed the relationship among quality, competition and regulated price. According to the results, competition has a statistically significant (yet weak) negative effect (p = 0.019) on quality. The outcome for quality is likely caused by imperfect information. It seems that Kela has provided too little information for patients about the quality of the service.

Suggested Citation

  • Piia Pekola & Ismo Linnosmaa & Hennamari Mikkola, 2017. "Competition and quality in a physiotherapy market with fixed prices," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(1), pages 97-117, January.
    • Handle: RePEc:spr:eujhec:v:18:y:2017:i:1:d:10.1007_s10198-016-0792-3
    DOI: 10.1007/s10198-016-0792-3
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