Does scale of public hospitals affect bargaining power? Evidence from Japan

Konosuke Noto, Takao Kojo, Ichiro Innami

Research output: Contribution to journalArticle

Abstract

Background: Many of public hospitals in Japan have had a deficit for a long time. Japanese local governments have been encouraging public hospitals to use group purchasing of drugs to benefit from the economies of scale, and increase their bargaining power for obtaining discounts in drug purchasing, thus improving their financial situation. In this study, we empirically investigate whether or not the scale of public hospitals actually affects their bargaining power. Methods: Using micro-level panel data on public hospitals, we examine the effect of the scale of public hospitals (in terms of the number of occupancy beds) on drug purchasing efficiency (DPE) (the average discount rate in purchasing drugs) as a proxy variable of the bargaining power. Additionally, we evaluate the effect of the presence or absence of management responsibility in public hospital for economic efficiency as the proxy variable of an economic incentive and its interaction with the hospital scales on the bargaining power. In the estimations, we use the fixed effects model to control the heterogeneity of each hospital in order to estimate reliable parameters. Results: The scale of public hospitals does not positively correlate with bargaining power, whereas the management responsibility for economic efficiency does. Additionally, scale does not interact with management responsibility. Conclusion: Giving management responsibility for economic efficiency to public hospitals is a more reliable way of gaining bargaining power in drug purchasing, rather than promoting the increase in scale of these public hospitals.

Original languageEnglish
Pages (from-to)695-700
Number of pages6
JournalInternational Journal of Health Policy and Management
Volume6
Issue number12
DOIs
Publication statusPublished - 2017 Dec 1

Fingerprint

Public Hospitals
Japan
Pharmaceutical Preparations
Economics
Proxy
Group Purchasing
Hospital Economics
Bed Occupancy
Power (Psychology)
Local Government
Motivation

Keywords

  • Bargaining power
  • Economies of scale
  • Management efficiency
  • Management responsibility
  • Public hospitals

ASJC Scopus subject areas

  • Health Policy

Cite this

Does scale of public hospitals affect bargaining power? Evidence from Japan. / Noto, Konosuke; Kojo, Takao; Innami, Ichiro.

In: International Journal of Health Policy and Management, Vol. 6, No. 12, 01.12.2017, p. 695-700.

Research output: Contribution to journalArticle

@article{72bedd5f95f74c18b4e962fde4f6c308,
title = "Does scale of public hospitals affect bargaining power? Evidence from Japan",
abstract = "Background: Many of public hospitals in Japan have had a deficit for a long time. Japanese local governments have been encouraging public hospitals to use group purchasing of drugs to benefit from the economies of scale, and increase their bargaining power for obtaining discounts in drug purchasing, thus improving their financial situation. In this study, we empirically investigate whether or not the scale of public hospitals actually affects their bargaining power. Methods: Using micro-level panel data on public hospitals, we examine the effect of the scale of public hospitals (in terms of the number of occupancy beds) on drug purchasing efficiency (DPE) (the average discount rate in purchasing drugs) as a proxy variable of the bargaining power. Additionally, we evaluate the effect of the presence or absence of management responsibility in public hospital for economic efficiency as the proxy variable of an economic incentive and its interaction with the hospital scales on the bargaining power. In the estimations, we use the fixed effects model to control the heterogeneity of each hospital in order to estimate reliable parameters. Results: The scale of public hospitals does not positively correlate with bargaining power, whereas the management responsibility for economic efficiency does. Additionally, scale does not interact with management responsibility. Conclusion: Giving management responsibility for economic efficiency to public hospitals is a more reliable way of gaining bargaining power in drug purchasing, rather than promoting the increase in scale of these public hospitals.",
keywords = "Bargaining power, Economies of scale, Management efficiency, Management responsibility, Public hospitals",
author = "Konosuke Noto and Takao Kojo and Ichiro Innami",
year = "2017",
month = "12",
day = "1",
doi = "10.15171/ijhpm.2017.29",
language = "English",
volume = "6",
pages = "695--700",
journal = "International Journal of Health Policy and Management",
issn = "2322-5939",
publisher = "Kerman University of Medical Science",
number = "12",

}

TY - JOUR

T1 - Does scale of public hospitals affect bargaining power? Evidence from Japan

AU - Noto, Konosuke

AU - Kojo, Takao

AU - Innami, Ichiro

PY - 2017/12/1

Y1 - 2017/12/1

N2 - Background: Many of public hospitals in Japan have had a deficit for a long time. Japanese local governments have been encouraging public hospitals to use group purchasing of drugs to benefit from the economies of scale, and increase their bargaining power for obtaining discounts in drug purchasing, thus improving their financial situation. In this study, we empirically investigate whether or not the scale of public hospitals actually affects their bargaining power. Methods: Using micro-level panel data on public hospitals, we examine the effect of the scale of public hospitals (in terms of the number of occupancy beds) on drug purchasing efficiency (DPE) (the average discount rate in purchasing drugs) as a proxy variable of the bargaining power. Additionally, we evaluate the effect of the presence or absence of management responsibility in public hospital for economic efficiency as the proxy variable of an economic incentive and its interaction with the hospital scales on the bargaining power. In the estimations, we use the fixed effects model to control the heterogeneity of each hospital in order to estimate reliable parameters. Results: The scale of public hospitals does not positively correlate with bargaining power, whereas the management responsibility for economic efficiency does. Additionally, scale does not interact with management responsibility. Conclusion: Giving management responsibility for economic efficiency to public hospitals is a more reliable way of gaining bargaining power in drug purchasing, rather than promoting the increase in scale of these public hospitals.

AB - Background: Many of public hospitals in Japan have had a deficit for a long time. Japanese local governments have been encouraging public hospitals to use group purchasing of drugs to benefit from the economies of scale, and increase their bargaining power for obtaining discounts in drug purchasing, thus improving their financial situation. In this study, we empirically investigate whether or not the scale of public hospitals actually affects their bargaining power. Methods: Using micro-level panel data on public hospitals, we examine the effect of the scale of public hospitals (in terms of the number of occupancy beds) on drug purchasing efficiency (DPE) (the average discount rate in purchasing drugs) as a proxy variable of the bargaining power. Additionally, we evaluate the effect of the presence or absence of management responsibility in public hospital for economic efficiency as the proxy variable of an economic incentive and its interaction with the hospital scales on the bargaining power. In the estimations, we use the fixed effects model to control the heterogeneity of each hospital in order to estimate reliable parameters. Results: The scale of public hospitals does not positively correlate with bargaining power, whereas the management responsibility for economic efficiency does. Additionally, scale does not interact with management responsibility. Conclusion: Giving management responsibility for economic efficiency to public hospitals is a more reliable way of gaining bargaining power in drug purchasing, rather than promoting the increase in scale of these public hospitals.

KW - Bargaining power

KW - Economies of scale

KW - Management efficiency

KW - Management responsibility

KW - Public hospitals

UR - http://www.scopus.com/inward/record.url?scp=85033674543&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85033674543&partnerID=8YFLogxK

U2 - 10.15171/ijhpm.2017.29

DO - 10.15171/ijhpm.2017.29

M3 - Article

VL - 6

SP - 695

EP - 700

JO - International Journal of Health Policy and Management

JF - International Journal of Health Policy and Management

SN - 2322-5939

IS - 12

ER -