Health economics and a little football on the side

The European Conference on Health Economics was held in Dublin in July at the same time as the winner of the Football World Cup was being decided in Brazil. Piia Pekola kicked things off for Kela in Dublin. Piia talked about an ongoing study that analyses whether competition between service providers has an impact on the quality of physiotherapy services for severely disabled persons.

Hanna Koskinen, Ulla Tuominen, Hennamari Mikkola and Piia Pekola.

Hanna Koskinen, Ulla Tuominen, Hennamari Mikkola and Piia Pekola.

The study focused particularly on services which are organized with service vouchers. A Kela voucher represents more price regulation than the service vouchers distributed by municipalities, which usually require that patients pay a relatively large deductible. There is no deductible for Kela vouchers.

Piia explained that although competition only affects quality slightly, it does in theory increase quality. Competition might have a greater impact if the customer had more information about service providers and the services that they offer. This would make it easier for the customer to choose the most suitable service provider.

The link between competition and quality

Kela could offer its customers more information, for example, via the internet. In the future, a customer could search Kela’s website for information such as the educational background and gender of the service provider and the business hours of the location. According to Professor Albert Okunade from the University of Memphis, who was the chair of Piia’s session, it would be even better if the actual quality of the produced service – in other words, the impact of the service on a patient’s health – could be accurately measured. However, this will take time and require a functional and reliable measurement system.

Studying the link between competition and quality is a popular topic in health economics research at this time. The conference included several studies that focused on productivity, competition, incentives and the customer’s choice, especially in the hospital market. Ireland attracted many American researchers. America already has a long history of providing customers with extensive freedom of choice in health care.

One of the keynote speakers was James P. Smith (RAND Corporation), who, on the basis of his research, joked that the NHS (National Health Service) in England is a great system until you get sick, but if a person has a serious or chronic disease, it’s better to live in America. Smith presented various comparisons between England and the United States that were based on a questionnaire study.

Few economists study dental care services

The next Kela presentation was a register-based analysis of the dental care market in the metropolitan region. Hennamari Mikkola explained that the dental care market in the private sector is not concentrated in Finland, and there is potential for competition. A new company with significantly lower prices than other operators has brought price competition to the market. In particular, the company appears to be utilising holiday seasons and also producing a lot of services during the summer, when other dentists are on vacation.

Based on the register, service providers were divided into three groups: chains, practices with two or more dentists, and individual dentists. The prices at practices that were part of chains were usually higher than in the other two groups. The reason for this may be a more businesslike approach in comparison to dental practices that do not belong to a chain. The chains appear to attract more women and wealthy customers, while older and possibly more loyal customers tend to use the services of more traditional practitioners.

Very few economists study dental care services. Only three studies on dental care were presented at the conference, and they were combined into a separate session. The French were particularly concerned about the fact that elderly people living in rural areas have poorer access to services than those living in cities. Lien Nguyen, who presented a National Institute for Health and Welfare (THL) study, also said that elderly people in Finland might use more dental care services, but private services are too expensive for them. The study seems to indicate that, since the dental care reform, wealthy people also tend to use public dental care services more than earlier.

The state of the reference price system for drugs today

Although researching dental care may not be popular among economists, pharmaceuticals are a different story altogether. Kela researcher Hanna Koskinen explained that the reference price system initially resulted in noticeable savings in Finland, but the effects have waned after the first year. The cause of this development has been less competition and the structural characteristics of the reference price system.

Hanna suggests that a short price notification interval of just two weeks may give pharmaceutical companies too much room to wait and see how the price develops. A German economist in the field, Professor Tom Stargardt from Hamburg Center for Health Economics, commented that pharmaceutical markets are typically concentrated. He considered Hanna’s research to be unique in that it was able to differentiate between the impacts of generic substitution and the reference price system on prices. In any case, Kela studies indicate that concentration and a lack of competition are a problem in terms of price development – at least from the funder perspective.

Fees for private doctors vary

Kela’s four-member team was anchored by Ulla Tuominen, who talked about a study that analysed the variation of fees charged by private doctors in 2012 by hospital district in four different specialist fields. The study revealed some large regional differences. The highest average fees were charged in the field of ophthalmology, where the average price for a 30-minute visit varied from 72 to 95 euros. However, the biggest price differences were found in gynaecology and obstetrics, where the average cost of a visit in the most reasonably priced hospital district was nearly 40% less than in the most expensive hospital district.

The study also analysed how the age and gender of a doctor and the concentration of markets and population in a region affect the amount of the fee. The effects of a doctor’s gender were visible in gynaecology, where female doctors charged higher fees than their male counterparts. A female gynaecologist is apparently a more agreeable option for many patients which may explain the higher demand and subsequently be reflected as higher prices. Doctors with more experience also charged higher prices.

Kela strives to enhance consumer awareness about the cost of private health care services by publishing hospital district and municipality-specific information about the average prices of private doctor’s appointments, various dental procedures, and different examination and treatment procedures on its website. Click on www.kela.fi/hintavertailu to access the price comparison.

The football World Cup was also visible at the conference. German flags and scarves were very much in evidence, and we were a bit envious. Germany also seems to be investing in health economics research. The Hamburg HCHE unit at the University of Hamburg alone has more than 50 health economists and 6 professorships. Hamburg will host the next European Conference on Health Economics in 2016.

Hennamari Mikkola
Chief of Health Research

Piia Pekola
Researcher

Hanna Koskinen
Researcher

Ulla Tuominen
Researcher

E-mail: firstname.lastname@kela.fi

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