Regional regulators in health care service under quality competition: A game theoretical model

Abstract

In several countries, health care services are provided by public and/or private subjects, and they are reimbursed by the government, on the basis of regulated prices (in most countries, diagnosis-related group). Providers take prices as given and compete on quality to attract patients. In some countries, regulated prices differ across regions. This paper focuses on the interdependence between regional regulators within a country: It studies how price setters of different regions interact, in a simple but realistic framework. Specifically, we model a circular city as divided in two administrative regions. Each region has two providers and one regulator, who sets the local price. Patients are mobile and make their choice on the basis of provider location and service quality. Interregional mobility occurs in the presence of asymmetries in providers' cost efficiency, regulated prices, and service quality. We show that the optimal regulated price is higher in the region with the more efficient providers; we also show that decentralisation of price regulation implies higher expenditure but higher patients' welfare.

Hospitals’ strategic behaviours and patient mobility: Evidence from Italy

“…In spite of the growing literature on quality competition, hospital strategies to attract patients across borders have been neglected. Bisceglia et al (2018) study the problem from a regulatory point of view and show that prices should be strictly correlated to efficiency. The strategic game that regions can play using patients mobility has been analysed by Levaggi and Menoncin (2013).…”

“…They are assumed to compete for patients on two levels: on the market for treating resident patients (D) and on the national market to attract patients from other regions (E). In this respect our model is similar to Bisceglia et al (2018), but with some interesting differences since we assume asymmetry in the competition setting as in Levaggi and Levaggi (2017). The analytical description of the model and the derivation of the quality levels for both hospitals are presented in Appendix A; in what follows we highlight the essential features of the model and the hypotheses that we test.…”

Evaluating the effects of quality regulations on the pharmaceutical supply chain

“…Meanwhile, the pharmaceutical market plays a key role for national healthcare systems in most countries around the world, as it affects how individuals access medications and how much they pay. As a result, the pharmaceutical market is heavily regulated in many developed and developing countries owing to the unique nature of pharmaceutical products and their critical role in meeting global health challenge (Yu et al 2010;Pezzola and Sweet 2016;Bisceglia et al 2018). While prices are regulated to ensure affordability and accessibility (Chen et al 2019b), the quality of both new and existing pharmaceutical products is regulated to improve health status of the population, as the public health impact of substandard medicine is potentially severe (Cockburn et al 2005;Bennett and Yin 2019).…”

Readmission treatment price and product quality in the hospital sector

“…See, for example,Bisceglia et al (2018),Brekke et al, 2010Brekke et al, (2010Brekke et al, , 2014, andLevaggi et al (2012), just to mention a few contributions that could be easily reinterpreted by explicitly considering re-admission payment as a tool to affect hospitals' quality provision. See, for example,Bisceglia et al (2018),Brekke et al, 2010Brekke et al, (2010Brekke et al, , 2014, andLevaggi et al (2012), just to mention a few contributions that could be easily reinterpreted by explicitly considering re-admission payment as a tool to affect hospitals' quality provision.…”

“…The links between competition, efficiency, and quality provision in hospital sector are investigated by a large body of theoretical and empirical literature. See, for example,Bisceglia et al (2018),Brekke et al, 2010Brekke et al, (2010Brekke et al, , 2014, andLevaggi et al (2012), just to mention a few contributions that could be easily reinterpreted by explicitly considering re-admission payment as a tool to affect hospitals' quality provision. 2 Notice that a monopolistic static framework, like inGuccio et al (2016), fails to address the effect of a decrease in the expected price mark-up for future patients (due to a reduced readmission payment) and the resulting incentive to quality.…”