Interview with Federica Maiorano, Senior Competition Expert at OECD
In the OECD Report on Competition Policy Papers No. 334: “Competition and regulation in the healthcare sector” what are the main competition-related findings?
A central message of paper is that competition can improve efficiency and quality in healthcare when it is properly supported by regulation. In systems where patients can choose providers and prices are regulated, competition often leads hospitals and other providers to improve quality in order to attract patients. However, competition is not a substitute for regulation in healthcare. The sector is characterised by equity objectives, as well as several features that make it unlike most other markets. For example, patients do not have sufficient information to understand what services they need to buy or to assess the quality of the services they are buying. The key policy challenge is to design regulatory frameworks that allow competition to deliver benefits without compromising quality or access to care.
The paper identifies licensing and entry restrictions as some of the most important competition concerns in healthcare markets. Requirements such as certificate-of-need regimes, needs-based planning systems, excessive minimum activity thresholds, or the involvement of incumbent providers in licensing decisions can reduce entry, limit capacity and weaken incentives for providers to improve quality. Competition authorities have therefore frequently advocated removing or reforming entry barriers that go beyond what is necessary to ensure quality and patient safety. Unclear or outdated regulatory frameworks also limit the incentives to invest, which could result in lower access to quality healthcare.
At the same time, competition can only work effectively when patients and payers have access to clear and usable information on prices, quality and outcomes. The paper therefore argues that pro-competitive regulation should not only remove unnecessary restrictions on suppliers but also empower patients to make informed choices, enabling competition to reward providers that offer higher quality and more efficient services.
An important trend that competition authorities should be aware of is the increased involvement of private equity and other financial investors in healthcare, particularly in outpatient services. This is important because it may lead to consolidation in some local markets, while “flying under the radar” of merger control requirements. But it is also very relevant from a broader competition perspective, because ownership structures can influence provider incentives and market dynamics, calling into question whether existing regulatory frameworks remain appropriate in light of these developments.
While investor capital may help expand healthcare capacity and support investment, evidence reviewed in the paper suggests that private equity ownership can be associated with higher costs for patients and payers, and in some cases with adverse effects on quality. Studies have found increases in prices, upcoding practices, selection of more profitable patients, reductions in staffing levels, and, in certain healthcare settings, poorer patient outcomes. At the same time, the paper notes that the evidence is not entirely uniform across settings and that policy debates increasingly focus on how to preserve competition and quality while managing the risks associated with investor-owned healthcare providers.
The report identifies workforce regulation as a major barrier to access. Which reforms to professional licensing and scope-of-practice rules have delivered the strongest results in OECD countries?
Professional licensing protects patients by ensuring that doctors, nurses and other healthcare professionals meet minimum quality standards. However, professional regulation can create unnecessary barriers to competition if requirements are more restrictive than needed. Particular concerns relate to narrow scope-of-practice rules, limited recognition of qualifications across jurisdictions, and excessive restrictions on entry into healthcare professions. These rules can restrict the supply of healthcare professionals, worsen workforce shortages, increase waiting times and reduce access to care. For example, evidence shows that allowing qualified nurse practitioners to perform a broader set of tasks independently can expand service capacity without harming patient outcomes.
Competition authorities have advocated for reforms that facilitate mobility and mutual recognition of licences, clarify or relax unnecessary supervision requirements, and remove unjustified restrictions on advertising and commercial communications. Moreover, they have issued decisions against price fixing by professionals and their professional bodies. Based on this work by competition authorities, the competition policy paper recommends not to remove licensing, but to ensure that professional regulation achieves patient protection objectives in the least restrictive way possible while improving access to healthcare services. Patients benefit when healthcare professionals can compete on quality, price and innovation, provided that appropriate safeguards remain in place.
The report highlights the importance of payment mechanisms in shaping provider behaviour and competition. In healthcare systems where prices are regulated rather than negotiated, how important is it that regulated tariffs reflect the real cost of efficient service delivery?
As a general point, the paper notes that payment mechanisms are not neutral from a competition perspective. Different payment models create fundamentally different incentives regarding volume, efficiency, quality and patient selection. Competition authorities should therefore view payment and reimbursement regulation as a key determinant of market outcomes. This also means strengthening advocacy for payment systems that preserve incentives for efficient and high-quality care while minimising distortions of competition.
This task is, however, complicated in practice, as payment mechanisms typically have both desirable and less desirable properties. For example, when policymakers try to curb overprovision and contain expenditure, these objectives should be balanced against the risk of reducing competitive pressure and innovation.
Some of the competition advocacy examples reviewed in the paper highlight the importance that tariffs are anchored to efficient costs. If tariffs are systematically below the cost of efficient provision, providers may be forced to cross-subsidise services, reduce quality, limit capacity or favour privately financed activities, thereby distorting competition and access. Conversely, tariffs that are not anchored to efficient costs may reward inefficiency or create artificial advantages for certain providers.
