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Low risk, high reward? Repeated competitive biddings with multiple winners in health care

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  • Visa Pitkänen

    (Social Insurance Institution of Finland)

  • Signe Jauhiainen

    (Social Insurance Institution of Finland)

  • Ismo Linnosmaa

    (University of Eastern Finland
    National Institute for Health and Welfare)

Abstract

We study physiotherapy providers’ prices in repeated competitive biddings where multiple providers are accepted in geographical districts. Historically, only very few districts have rejected any providers. We show that this practice increased prices and analyze the effects the risk of rejection has on prices. Our data are derived from three subsequent competitive biddings. The results show that rejecting at least one provider decreased prices by more than 5% in the next procurement round. The results also indicate that providers have learned to calculate their optimal bids, which has also increased prices. Further, we perform counterfactual policy analysis of a capacity-rule of acceptance. The analysis shows that implementing a systematic acceptance rule results in a trade-off between direct cost savings and service continuity at patients’ usual providers.

Suggested Citation

  • Visa Pitkänen & Signe Jauhiainen & Ismo Linnosmaa, 2020. "Low risk, high reward? Repeated competitive biddings with multiple winners in health care," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 21(4), pages 483-500, June.
    • Handle: RePEc:spr:eujhec:v:21:y:2020:i:4:d:10.1007_s10198-019-01143-1
    DOI: 10.1007/s10198-019-01143-1
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    Cited by:

    1. Visa Pitkänen & Ismo Linnosmaa, 2021. "Choice, quality and patients’ experience: evidence from a Finnish physiotherapy service," International Journal of Health Economics and Management, Springer, vol. 21(2), pages 229-245, June.
    2. Visa Pitkänen, 2022. "Competition and efficiency in repeated procurements: Lessons from the Finnish rehabilitation markets," Health Economics, John Wiley & Sons, Ltd., vol. 31(5), pages 820-835, May.

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    More about this item

    Keywords

    Health care; Competitive bidding; Competition; Choice modelling; Prices;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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