Competition in the Health Sector
Luigi Siciliani
University of York
1 December 2025
Global Forum on Competition, OECD, Paris
Health sector is multifaceted and complex
• Price and non-price competition (e.g. quality)
• Different areas: hospitals, primary care providers, health insurance, medicines, pharmacies, long-term care (nursing homes)
• Hospitals: illustrative example, often prices are regulated
• Siciliani et al (2022) Does Provider Competition improve health care quality and efficiency? European Observatory of Health Systems and Policies, Policy Brief, 48
• https://eurohealthobservatory.who.int/publications/i/does-provider-competitionimprove-health-care-quality-and-efficiency-expectations-and-evidence-fromeurope
Effect of competition on hospital quality
Quality competition
• Provider market structure HHI
• Quality (mortality, readmissions), efficiency (cost, LOS), waiting, volume
• Studies from England, Norway, Netherlands, France, Finland
• Evidence is mixed
• England: competition had negative effect on quality before price regulation, and a positive effect after price regulation
• Netherlands: price deregulation did not reduce quality
• Norway: patient choice policies had mixed effects on health outcomes
Patient choice of provider (hospital, GP)
Patient choice quality
• Patient choice pre-requisite to stimulate competition
• Multinomial logit models
• Distance and quality key drivers of patient choice
• Prices are regulated, out-of-pocket payments small or zero
• Willingness to travel for an improvement in quality, demand elasticities
• Studies from Netherlands, England, Germany, US, Italy
• Quality matters but distance is key driver of choice: patients stay close
• Mechanisms: word of mouth, public reporting
• These models can be used to simulate mergers and closures
• Beckert et al (2012, Economic Journal); Gravelle et al (2024, Regional Science and Urban Economics)
Hospital merger and closure
• Retrospective studies that look at hospital mergers
• Evidence from US generally finds that mergers do not affect quality
• Study from England: no effect on quality but reduced activity and staffing
• Other literature looking at hospital entry or exit
• Petek (2022) for US: entry increases inpatient care & emergency visit, no short term effect on mortality
• Volume and outcome literature (learning-by-doing effects)
Public and private mix in provision
• Public & private hospitals compete side by side in several countries
• France, Germany, Italy, England, Spain
• Mix of public and private providers treating publicly-funded patients
• Casemix of patients can be different, possible cream skimming
• Evidence
• Differences in quality diminish or disappear when controlling for patient casemix and reimbursement mechanism (DRG, fixed budget, FFS)
• Role of regulation and reimbursement mechanisms
Competition and integrated care
• Many European countries are encouraging integrated care
• Better coordination for patients with chronic conditions
• Netherlands, Germany England
• Integration of primary care with secondary care, rehabilitation, outpatient, community care, long-term care
• Tension between competition and integration
• Competition for integrated care packages
Health insurance competition
• Across OECD countries, insurance can be:
• Duplicative, supplementary and complementary (OECD, 2025)
• Competition, voluntary private insurance and unobserved health
• Leads to market failure (“adverse selection”; poor coverage of low risk)
• Extensive evidence on adverse selection for health risks from the US
• Mandatory health insurance / community rating
• Germany, Netherlands, Switzerland
• Competition creates a different issue: incentive to avoid high risk patients
• Risk adjustment models
And many other competition issues
• Drugs
• Competition between branded and generics, generic competition paradox
• Innovation and patented drugs, pull and push policies
• Me-too versus breakthrough drugs
• Value-based pricing, international reference pricing, parallel imports
• Public health care (2025), Cambridge Elements.
• Public procurement
• Medicines, equipment, health technology and e-health
• Inclusion of quality and environmental considerations
• Most economically advantageous tender: cost-effectiveness, price-quality ratio
• Public procurement in healthcare systems (2021), Opinion by the Expert Panel on Effective Ways of Investing in health (discusses challenges and opportunities)
• Pharmacies: Entry and barriers
