Abstract
Introduction
In many tax-based healthcare systems, policymakers have introduced reforms that promote provider competition with the intention of improving the quality and efficiency. Healthcare competition is usually defined spatially, with local markets often being identified as a circle around each provider. We argue that existing local market definitions can be improved to better capture actual local markets. For pro-competition reforms to potentially lead to the gains envisioned by policymakers, a crucial condition is the actual emergence of competitive markets. However, limited research has been conducted on competition in primary care markets, despite primary care constituting a vital part of a healthcare system.
Aim
The study aims to contribute to the debate on how to define local markets geographically and to examine provider competition in Swedish primary care.
Methods
A cross-sectional study was conducted using data on all individuals and all primary care providers in Sweden. Local markets were defined as: fixed radius (1 km and 3 km); variable radius; and variable shape—our new local market definition that allows markets to vary in both size and shape. Competition was measured using the Herfindahl-Hirschman index and a count of the number of competitors within the local market.
Results
Fixed radius markets fail to capture variation within and across geographical areas. The variable radius and variable shape markets are similar but do not always identify the same competitors or level of competition. Furthermore, competition levels vary significantly in Swedish primary care. Many providers operate in monopoly markets, whereas others face high competition.
Conclusions
While the variable shape approach has the potential to better capture actual markets and more accurately identify competitors, further analyses are needed. Moreover, Swedish policymakers are advised to decide whether to still pursue competition and if so, take measures to improve local market conditions in monopolies.