Conference Abstracts

Hugh Gravelle, Anthony Scott, Peter Sivey, Jongsay Yong

Abstract
Studies of the impact of competition between physicians are rare and have been unable to successfully allow for the endogeneity of physician supply.  The aim of this paper is to examine the effect of competition on prices charged by General Practitioners (GPs) in Australia, who are free to set prices for consultations. Under the national tax funded Medicare insurance scheme patients pay the difference between the price set by the GP and a fixed reimbursement.  In 79% of consultations, GPs ‘bulk bill' the patient ie the patient makes no out of pocket payment and the GP is paid the fixed Medicare reimbursement.  We construct a Vickrey-Salop model of GP third degree price and quality discrimination with bulk billing.  We test its predictions using a dataset with individual GP-level data on prices, the proportion of patients who are bulk billed, average consultation length, and characteristics of the GPs, their practices and patients.  We use area effects (fixed, random, Mundlak) to control for endogeneity of GP location decisions.  We find that GPs with more distant competitors bulk bill a smaller proportion of their patient, charge higher prices to patients they do not bulk bill, and have shorter consultations. 

JEL: I11, I13, L1

Keywords: Competition. Prices. Quality of care. Primary care.  Physicians.
 

Charlotte Davies & Paula Lorgelly

Abstract
NHS procurement has become an increasing focus of research and policy. While much is known about pharmaceuticals, much less is known about medical devices, and in particular the role of the supplying industry.  This paper helps redress this imbalance by focusing on the hip prosthesis industry. It assesses the potential for market power in that industry and implications for hospital purchasing. Using a rich data source, the National Joint Registry we construct measures of market structure and show conceptually how concentration at the national level translates into the concentration of procurement at the individual hospital level. We find that concentration at the national level is high (equivalent to just 4 equal sized firms), but the typical concentration of hospital procurement is even higher (equivalent to concentrating its purchases on just 2 suppliers.)  Given that procurement is decided at the hospital, not national, level, this raises the possibility that, far from exercising its monopsony power, the NHS may be exposed to considerable seller power at the local level. Using multi-variate panel analysis, we examine the determinants of hospital procurement.  Results reveal, although hospital size has some importance (larger hospitals are able to source their prostheses from more suppliers), there is also evidence of significant variations between both different regions and different hospital types, which might reflect market sharing by suppliers.  We also find that the introduction of a national tariff led to increased specialisation in procurement.. These results highlight the need for further survey-based research which explores decision making within hospitals by individual surgeons.