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Eur J Health Econ (2011) 12:316 DOI 10.1007/s10198-010-0217-7
ORIGINAL PAPER
Public health care providers and market competition: the case of Finnish occupational health services
Eila Kankaanpaa Ismo Linnosmaa
Hannu Valtonen
Received: 6 July 2009 / Accepted: 7 January 2010 / Published online: 29 January 2010 Springer-Verlag 2010
AbstractBackground As reforms in publicly funded health systems rely heavily on competition, it is important to know if and how public providers react to competition. In many European countries, it is empirically difcult to study public providers in different markets, but in Finnish occupational health services, both public and private forprot and non-prot providers co-exist. We studied possible differences in public providers performance (price, intensity of services, service mixcurative medical services/prevention, productivity and revenues) according to the competitiveness of the market.
Materials and methods The Finnish Institute of Occupational Health (FIOH) collected data on clients, services and personnel for 1992, 1995, 1997, 2000 and 2004 from occupational health services (OHS) providers. Employers defray the costs of OHS and apply for reimbursement from the Social Insurance Institution (SII). The SII data was merged with FIOHs questionnaire. The unbalanced panel consisted of about 230 public providers, totalling 1,164 observations. Local markets were constructed from several municipalities based on commuting practices and regional collaboration. Competitiveness of the market was measured by the number of providers and by the
Herndahl index. The effect of competition was studied by ordinary least square regression analysis and panel models.
Results The more competitive the environment was for a public provider the higher were intensity, productivity and the share of medical care. Fixed panel models showed that these differences were not due to differences and changes in the competitiveness of the market. Instead, in more competitive markets public providers had higher unit prices and higher revenues.
Keywords Market competition Public provider
Performance Productivity Intensity Price
JEL Classication I11 L11 L25
Introduction
Product market competition plays a signicant role in the policy recommendations of economists. The competitive market is thought to be superior to other market arrangements because it allocates scarce resources efciently. Moreover, it is often believed that product market competition also improves quality and lowers unit costs [1]. Public production, on the other hand, is considered more of a policy instrument, introduced only if...