Abstract

There has been a trend towards encouraging more competition in the provision of health care services - particularly in the areas of home and community care - in the past two decades throughout most of the developed world, including Canada and Ontario specifically. This case study uses the setting of the market for home care services in a Dutch province to examine how characteristics of that market influenced the effects of competition policy and impacted the nursing and care personnel employed by home care agencies. The study found that in the home care market, where provider salary accounts for a major portion of the costs, factors such as labour supply and competition for health care providers can play an important role in determining how policy changes are actually implemented. Background: There has been a trend towards encouraging more competition in the provision of health care services - particularly in the areas of home and community care - in the past two decades throughout most of the developed world, including Canada and Ontario specifically. Policy makers have employed numerous tools to realize this goal such as implementing competitive bidding processes for service contracts, encouraging and subsidizing new suppliers to enter the market, and reducing service volume and budget level guarantees to existing providers. These changes in policy and regulation have had mixed results in achieving their aims of lower costs and greater choice to consumers. This case study uses the setting of the market for home care services in a Dutch province to examine how characteristics of that market influenced the effects of competition policy. In particular, the authors looked at the impact of these policies on the nursing and care personnel employed by home care agencies.

Methods: Observations concerning the number of home care providers and the size of the labour market were taken from 1987, at which time competition policies were initially implemented, to 1997, at which time this policy direction was temporarily halted. These observations were augmented with anecdotal and contextual information about the functioning of the market over that period. The resulting history was then analyzed using economic and organizational theories of market competition. Where necessary, these theories were adjusted to take into account the unique characteristics of the home care market.

Findings: In the Dutch case study, the government attempted to decrease political barriers to encourage new home care organizations to enter the market. Budget guarantees to existing firms, however, were only reduced by 5% and so few new organizations entered the market. In fact, existing organizations underwent mergers over the time period, actually reducing the number of home care organizations. Furthermore, during the period under study demand for home care rose due to demographic, epidemiological, and socio-cultural factors, but the government did not provide additional funding to meet this demand. During this period there was an adequate supply of nursing and care personnel and little competition for workers from within the home care market or from other health care sectors. The home care organizations were therefore able to pass the burden of this reduction onto workers through more flexible but less generous contracts, implementation of technology to reduce the required number of personnel and a shift in care provision to less expensive workers (i.e. from nursing to care personnel). Furthermore, clients received fewer hours of service and waiting lists increased. In recent years, these dynamics are expected to have changed because the supply of nursing and care personnel has decreased while the government has increased funding to address the waiting lists. Since both of these forces act to increase demand for services from existing home care workers, their bargaining power has likely improved in recent years.

Conclusions: This case study demonstrates how the attempt to introduce competition in publicly financed markets may have unexpected consequences. In the home care market, where provider salary accounts for a major portion of the costs, factors such as labour supply and competition for health care providers can play an important role in determining how policy changes are actually implemented.

Reference: Breedvels, EJ, Meijboom, BR, de Roo, AA. "Labour supply in the home care industry: A case study in a Dutch region" Health Policy, 2006; 76 144-155.