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Transcript of Thesis Arrindell abridged
Rent-seeking in healthcare; an
explorative literature review
Master Thesis
Dennis Arrindell
i6009443
Maastricht University, Master Healthcare Policy, Innovation and Management
Supervisors: Aggie Paulus, Phd. & Arno van Raak, Phd.
Supervisor placement institution: drs. Francois Simon
Maastricht. July 5, 2014.
“The monopoly privileges and restrictions of the professions are created by legislation and thus
any complete theory of professionalization must include an account of the workings of the
political market. This is notably absent from the writings of those who believe the professions act
in the public interest in restricting and regulating supply” – Gravelle (1985).
“If a savvy observer can accurately predict our [radiologists] position on every issue strictly on
the basis of a consideration of our own economic interests, then we are subject to Bernard
Shaw’s scathing indictment of professions as “conspiracies against the laity.” – Gunderman &
Tawadros (2007).
Acknowledgement: I would like to extend my gratitude to my thesis supervisor, Aggie Paulus
Phd., who provided guidance and greatly assisted me in giving shape to embryonic ideas and
rudimentary conjectures in order to transform these into a structured research. In addition, I
would like to extend my gratitude to the deputy-director of the social insurance bank in Curaçao,
Francois Simon drs., who functioned as my placement supervisor and greatly expanded my
knowledge on the art of expedient health purchasing.
Table of Contents 1. Introduction .............................................................................................................................................. 1
1.1. Introduction ....................................................................................................................................... 1
1.2.1. Background ..................................................................................................................................... 1
1.2.2. Societal relevancy ........................................................................................................................... 3
1.2.3. Scientific relevancy ......................................................................................................................... 3
1.2.4. Practical relevancy .......................................................................................................................... 4
1.3.1. Goal ................................................................................................................................................. 6
1.3.2. Problem statement ......................................................................................................................... 6
1.3.3. Research questions ......................................................................................................................... 7
1.3.4. Clarification of research questions ................................................................................................. 7
1.3.5. Definition of key concepts .............................................................................................................. 7
1.4. Chapter division ................................................................................................................................. 9
2. Theoretical framework and model ......................................................................................................... 10
2.1. Introduction ..................................................................................................................................... 10
2.2. Public choice theory ......................................................................................................................... 10
2.3. Rent-seeking dissected .................................................................................................................... 10
2.4. Capturing income transfers in healthcare ....................................................................................... 12
2.5. Restricting total production output in healthcare ........................................................................... 14
2.6. Inducing the government to impose production output restrictions in healthcare........................ 16
2.7. Theoretical model ............................................................................................................................ 18
3. Methodological framework .................................................................................................................... 19
3.1. Introduction ..................................................................................................................................... 19
3.2. Research type/design....................................................................................................................... 19
3.3. Data collection ................................................................................................................................. 19
Figure 3.1. Methodological steps: ........................................................................................................... 22
3.4. Data analysis .................................................................................................................................... 22
3.4.1. Data analysis research question 1 ................................................................................................ 22
3.4.2. Data analysis research question 2 ................................................................................................ 23
3.4.3. Data analysis research question 3 ................................................................................................ 23
3.4.4. Data analysis research question 4 ................................................................................................ 23
3.4.5. Data analysis research question 5 ................................................................................................ 24
3.4.6. Content matrix .............................................................................................................................. 24
3.5. Validity ............................................................................................................................................. 25
3.6. Reliability .......................................................................................................................................... 25
4. Results ..................................................................................................................................................... 27
4.1. Introduction ..................................................................................................................................... 27
4.2. Search results ................................................................................................................................... 27
Figure 4.1. Flowchart of included articles ............................................................................................... 28
4.3. Results Research Question 1 ............................................................................................................ 29
Table 4.1. included studies: .................................................................................................................... 29
4.4. Results Research Question 2 ............................................................................................................ 34
4.5. Results Research Question 3 ............................................................................................................ 39
4.6. Results Research Question 4 ............................................................................................................ 46
4.7. Results Research Question 5 ............................................................................................................ 50
5. Conclusion, Discussion and Recommendations ...................................................................................... 59
5.1. Introduction ..................................................................................................................................... 59
5.2. Conclusion ........................................................................................................................................ 59
5.3. Discussion ......................................................................................................................................... 63
References: ............................................................................................................................................. 68
Documents participatory study .................................................................................................................. 73
1. Letters from two hospitals .................................................................................................................. 74
2. Letter from gynecologist association .................................................................................................. 75
3. Turf conflict midwifery-gynecologist .................................................................................................. 76
4. Parliamentary discussion#1 ................................................................................................................ 77
5. A plight for stricter regulation ............................................................................................................ 78
6. Parliamentary discussion #2 ............................................................................................................... 80
7. Law that restricts market entry .......................................................................................................... 81
8. Arbitrary entrance criteria .................................................................................................................. 83
9. Letter from physician association ....................................................................................................... 84
10. Control over accreditation ................................................................................................................ 85
11. Demanding economic credentialing ................................................................................................ 87
12. Denying hospital privileges ............................................................................................................... 88
13. Price-fixing amongst pharmaceutical importers ............................................................................... 91
14. Prohibiting expedient division of labor ............................................................................................. 92
15 .Certificate of need laws .................................................................................................................... 93
16. Goodwill as an entry barrier ............................................................................................................. 94
17. Economic and political integration by pharmaceutical wholesalers ................................................ 95
18. Request for legal advice for physician association ........................................................................... 96
19. Legal response to physician association ........................................................................................... 97
20. Control over market entry through accreditation ............................................................................ 98
21. Creating demand for the treatment of broad social conditions ....................................................... 99
Appendix 1: Search results per database per keyword: ....................................................................... 103
Appendix 2: Possibly relevant articles: 82 (27 upon application of inclusion form)............................. 107
Appendix 3: Table inclusion form ......................................................................................................... 112
Appendix 4: Thick data matrix .............................................................................................................. 114
Abstract
Background: Public choice theory as an explanatory model for healthcare policy is not an area
that receives a lot of attention in healthcare policy literature. Public choice theory can be used to
understand and predict what government policies economic actors will endorse or obstruct.
Aim: This study uses the concept of ‘rent-seeking’ used in public choice theory to test if and to
what extent rent-seeking behavior is manifested in healthcare policy. This is done by means of an
explorative literature research further substantiated by anecdotal evidence obtained through a
participatory study at a social insurance bank tasked with purchasing health output.
Methods: An explorative literature research was conducted to gather information on rent-
seeking in healthcare. Using a pre-defined search protocol tailored to jargon used in public
choice theory and consulting two separate academic databases; Science Direct (Elsevier) and
EBSCO host. Hits were screened and assessed using an inclusion form.
Results: 27 articles were eventually included for analysis. These articles provided relevant
information on the practice of rent-seeking in healthcare policy. Together, the included articles
indicated how income transfers are captured in the context of healthcare, how total industry
supply is restricted to create higher incomes for incumbent suppliers and finally, how
governments are induced to grant political awards to rent-seeking agents in the context of
healthcare policy.
Conclusion and discussion: The findings suggest that healthcare policy in western countries is
host to a variety of rent-seeking activity, manifested by legal and tacit restrictions on external
and internal competition to create economic rent for incumbent suppliers. These restrictions limit
market entry by new entrants and prohibit competition between members of allied professional
guilds. For incumbent suppliers of healthcare services and commodities, these cartel practices
raise their income without having to deliver any significant reciprocal value. The findings
suggest that western healthcare policy is to a great extent geared to safeguard the interest of the
medical community of interest at the expense of the general public, something in accordance
with public choice theory.
1
1. Introduction
1.1. Introduction Healthcare policies in the western world are invariably affected by lobbying activity (Enthoven,
2012). By means of an explorative literature review, this master thesis aims to investigate the
ramifications of special interest group influence on healthcare policy and regulation. Public
choice theory (Buchanan & Tullock, 1962) provides an economic rationale as to why certain
institutions will endorse particular market interventions to safeguard special interest economic
gains e.g. in the form of protectionism or receiving subsidies. In order to comprehend the
economic rationale behind special interest induced policy and regulation, rent-seeking theory is
relied upon throughout this master thesis to provide assumptions on what type of public policies
are pursued and what economic effects are expected by the special interest groups. Lobbying
activity is employed to achieve rent-seeking goals whereby suppliers manipulate the social and
political environment in order to redistribute existing wealth towards special interest groups
(Tullock, 1967). In addition to the explorative literature review, a subset of anecdotal evidence
on rent-seeking behavior in healthcare policy and practice is collected through a participatory
study whereby data is obtained from operations between the major social insurance fund in
Curaҫao and its countervailing power, the healthcare providers. This data is presented to
complement and give substance to the assumptions laid out in the theoretical part.
The first part of this chapter elaborates on the background and the societal relevance of the
overarching theme of rent-seeking behavior in healthcare. Next, the added value of this master
thesis to the existing body of academic literature is highlighted followed by a brief explanation
of its practical relevance. The subsequent section of this chapter lays out the goal, problem
statement and research questions of this study. The chapter concludes with a further clarification
of the research questions combined with a list of definitions of the key concepts.
1.2.1. Background Rent-seeking in its concrete application entails that the suppliers purposely restrict total
production output and total supply in the market place in an effort to create privileged monopoly
positions and higher incomes i.e. ‘capturing’ income transfers. The concept of rent-seeking first
appears in work by Tullock (1967) to explain why economically inefficient policies gain
persistent support in political discourse and public policy. Krueger (1974) independently coined
the term ‘rent-seeking’ in her investigation on import restrictions in India and Turkey. The term
rent in this context is derived from Adam Smith’s classifications of income into wages, profits
and rent. Rent refers to that fraction of the price which is not related to any economic activity or
value. Economic rent can be generated when suppliers have control over total production output
(Tollison, 2012). A frequently highlighted example is when a concentrated group of taxi drivers
can charge seven dollars instead of five dollars per ride thanks the elimination of competition
2
due to licensure, the extra two dollars obtained per ride thanks to the monopoly is called
‘economic rent’.
In the article by Krueger (1974), the author points out that there are costs associated with
obtaining a source of rent as suppliers compete for concessions if the government imposes output
restrictions. Rent-seeking can be interpreted as all the political efforts and resources allocated by
suppliers in order to induce the government to create total production output restrictions or to
enjoy the privilege of a government concession on a sector of the economy with output
restrictions.
A monopoly allows for the capture of income transfers, because the monopoly construction
allows for artificial price inflation without producing added value. Existing wealth is thus
redistributed towards the rent-seeker. To obtain a privilege monopoly position, the rent-seeking
agent induces the government to create output restrictions on the industrial sector. From this
perspective, the government is a dealer of output restrictions (e.g. through enforcing import
quotas or introducing licensure for taxi drivers) and the producers of goods & services are
demanders of output restrictions as they desire to create and sustain monopolies by seeking
privilege through government regulation. Output restrictions limit the available supply. The
desired effect thus is to produce higher profits for the limited amount of privileged suppliers.
Tullock (1967) and Krueger (1974) point out that besides the inefficiency costs related to
monopolies, additional inefficiency costs for society are created when rent-seeking occurs. This
is due to the fact that the suppliers demanding output restrictions spend resources in order to gain
monopoly privileges or preferential treatment for subsidies through e.g. bribes, campaign
contributions and other forms of financial inducements. These costs are, in an economic sense,
unrelated to production and distribution and thereby exceed the actual opportunity costs of the
economic activity conducted. For example, the campaign contributions of a taxi drivers union to
a politician to introduce taxi licensure in order for the taxi driver union to obtain a privileged
monopoly position are also incorporated in the average price tag for a taxi cab fare and affect the
consumer surplus. The actual opportunity cost of the economic activity (i.e. the production,
distribution and markup cost incurred for driving passengers around in a free market) would be
less if the rent-seeking construction was absent. Rent-seeking is costly for economic growth
(Murphy, Schleifer & Vishny, 1993).
Rent-seeking thus describes all activities undertaken and resources spent to capture and secure an
income transfer. Such expenditures include, but are not limited to: lobbying for government
concession rights in order to artificially create monopolies, paying goodwill fees to established
monopoly holders in order to obtain their existing source of rent and ‘capturing’ regulatory
authorities in order to manipulate regulation to restrict competition.
3
1.2.2. Societal relevancy The healthcare industry is heavily regulated and thus has a potential for rent-seeking institutions
to capture and secure economic transfers through influencing healthcare policies. The medical
community of interest has historically taken on a leading role in agenda setting of health policy
in the western world through various organizations that conduct research, distribute publications,
accredit schools, grant funding, enforce quality measures and engage in extensive lobbying and
health advocacy (Hamowy, 2007). Such structural entanglement of producer interest, producer
influence on public policy and producer participation in academic debates can have far reaching
implications on the impartiality of the healthcare policy discussions in society as there are often
multiple conflicts of interest involved (Lo & Marilyn, 2009).
This study investigates healthcare policy from a rent-seeking perspective. This might shed new
light on status quo policies that are an integral part of healthcare organization and management.
The findings may thus provide a nuanced interpretation of status quo policies which are
commonly taken at face value1. Moreover, the findings may contribute to the exploration of
viable alternatives for the financing and provision of healthcare without the economic
inefficiencies created and sustained due to regulation specifically designed to promote rent-
seeking objectives2.
From a public choice theory perspective, public policies and supporting scientific publications
that receive extensive political support from rent-seekers might depart from safeguarding the
general interest towards bestowing benefits upon a concentrated group. Olson (1965) points out
that concentrated benefit groups have more incentives to pour resources into influencing policy
making than do the diffuse cost group. This can entail that on a structural basis, the particular
interests of the concentrated benefit groups might be disproportionally reflected in actual
healthcare policy to the adversity of the diffuse costs group.
1.2.3. Scientific relevancy Though publications exists on conflict-of-interest in healthcare (Cosgrove et al., 2006; Lo &
Marilyn, 2009), antitrust economics in healthcare (Vita, Langenfeld, Pautler & Miller, 1991) and
of the specific mechanics of lobbying in healthcare (Landers & Seghal, 2004), the economics of
rent-seeking as a rationale for policy support does not receive a lot of attention in healthcare
policy literature. Articles that describe healthcare policy from a public choice perspective do
exists e.g. Cherkes, Friedman & Spivak (1986) Friesner & Stevens (2007) Goddard, Hauck,
Preker & Smith (2007) and Tollison & Wagner (1991). These articles however, review only a
1 Tullock (1989) notes that rent-seeking requires deception of the public and rationalization of harmful (i.e.
consumer surplus reducing) economic policies in order to gain support for a policy despite its adverse effects to the
diffuse cost group.
2 Leffler (1978) and Paul (1984) argue that physicians support for licensure policy is deeply rooted in monopoly
strategies. Cherkes, Friedman & Spivak (1986) argue that the societal cost of rent-seeking activity in healthcare is
high and unevenly skewed to benefit the industry. According to the authors, this explains the healthcare industry’s
disinterest in de-regulation.
4
portion of the healthcare industry. To the knowledge of the researcher, no research has been done
that incorporates a broad range of public choice and rent-seeking theory in order to analyze
prevailing healthcare policies and to predict economic pursuits of healthcare providers based on
these grounds. A public choice theory analysis of rent-seeking behavior in healthcare policy may
increase understanding on existing and/or proposed healthcare policies and provide new
substance for the academic debate on healthcare policy.
1.2.4. Practical relevancy
Understanding the principles behind rent-seeking in the domain of health economics can help
inform decision makers when engaging in financial negotiations with healthcare actors and their
representatives. Health output purchasers such as insurance companies and sickness funds might
be able to take rent-seeking economic behavior into account to be better prepared when
undergoing negotiations with contracted medical providers and tariff committees (e.g.
Lieverdink & Maarse, 1995).
The motivation for choosing the social insurance bank in Curaҫao to investigate rent-seeking
behavior stems from the fact that Curaҫao has a long history of intense government intervention
in the financing, provision and regulation of healthcare (Westerhof & Felida, 2012).
Furthermore, Curaҫao has a long history of neo-corporatist style policy making which entails that
the government in many cases delegates authority to expert panels and commissions ‘from the
field’ and uses the produced recommendations as a basis for policy making, a practice also
common in the Netherlands (van de Bovenkamp, Trappenburg & Grit, 2010). Curaҫao and the
Netherlands both form part of the Dutch Kingdom, share similarities in the regulation of
healthcare policy and exchange practices.
Besides the fact that neo-corporatist policy making is typically accompanied by legitimate
concerns about democratic deficit in existing literature (van de Bovenkamp, Trappenburg & Grit,
2010), a more pressing issue is that the experts recruited ‘from the field’ remain rational
economic actors and understandably prioritize the impact of the proposed policies to their own
income above all. In addition to this, the small size of the island of Curaҫao stimulates an
environment where, rather than operating competitively, the limited number of market players
often opt to operate cooperatively through market sharing arrangements i.e. cartels (Leussink,
2011). This is an observation that corresponds with theoretical economic assumptions for small
scale markets (Gal, 2009).
With all of the above taken into account, the economic effects in a small community where the
cooperative market players can exert influence on policy making through neo-corporatism, there
invariably surfaces a significant spectrum of opportunities to engage in the capturing and
securing of income transfers. The Curaҫao healthcare market thus forms a suitable base of study
from which to yield anecdotal evidence to further develop the overarching theme of rent-seeking
behavior in healthcare policy. Last but not least, access to policy information and records on the
healthcare market in Curaҫao is facilitated through the placement supervisor of this thesis, Mr.
5
Simon, who at the time of this writing functions as the deputy director of the social insurance
bank in Curaҫao responsible for 90% of total health purchase on the island.
6
1.3.1. Goal The aim of this thesis is to investigate the ramifications of rent-seeking behavior in healthcare
policy and practice. In order to acquire a broader view on the issue at hand two steps are
undertaken. Chiefly, an explorative literature review is conducted whereby existing literature on
lobbying for output restrictions in healthcare is sought out and analyzed according to the
contours of rent-seeking theory. The main goal of the explorative literature review is the
following:
To identify studies that elaborate upon how income transfers are captured by the medical
community of interest to subsequently use these studies to deduce how total production output is
restricted in the healthcare market, how the government is induced by the medical community of
interest to impose said restrictions and finally, to collect anecdotal evidence on rent-seeking
behavior within the context of the Curaҫao healthcare market.
Focusing specifically on rent-seeking theory, the following objectives guide the direction of this
study:
1) On the basis of an explorative literature review, to investigate how income transfers are
captured by the medical community of interest by means of government intervention in
the context of healthcare.
2) On the basis of an explorative literature review, to investigate how production output
restrictions are contrived in the context of healthcare policy.
3) On the basis of an explorative literature review, to gain an understanding on how the
healthcare industry induces the government to act as a dealer of output restrictions to
privilege the medical community of interest.
4) To gather anecdotal evidence on the practice of rent-seeking in the context of the
Curaҫao healthcare market through a participatory study at the social insurance bank in
Curaҫao.
1.3.2. Problem statement The goal of this thesis is framed into the following problem statement:
Which studies have been conducted that investigate the methods by which rent-seeking actors
capture income transfers within the context of healthcare, what do these studies indicate about
how production output restrictions are contrived, how do rent-seeking actors induce the
government to impose such restrictions according to the studies and what anecdotal evidence
can be obtained on the practice of rent-seeking in the context of the Curaҫao healthcare market?
7
1.3.3. Research questions In order to analyze the problem statement, the following research questions are devised:
1) What studies have been conducted that explore rent-seeking behavior in healthcare?
2) What do the findings of these studies indicate about healthcare policy as a potential tool for
rent-seeking agents to capture income transfers?
3) What do the studies indicate about the manner in which rent-seeking agents restrict total
production output in healthcare?
4) What do the studies indicate about the manner by which suppliers induce the government to
introduce production output restrictions on the industry?
5) What anecdotal evidence does there exist on the practice of rent-seeking within the context of
the Curaҫao healthcare system?
1.3.4. Clarification of research questions The first research question serves to gain an overview of the available literature on rent-seeking
behavior in healthcare. Rent-seeking is conceptualized as a rational economic pursuit that can be
promoted through lobbying and conflict-of-interest constructions that influence market
regulation (Tollison, 2012). This conceptualization allows for the inclusion of studies on
lobbying and conflict-of-interest in healthcare in order to review publications where lobbying
and conflict-of-interest constructions are indentified as a vehicle to promote rent-seeking
objectives. In addition, studies related to entry barriers and occupational licensures are included
as rent-seeking behavior is primarily embodied through production output restrictions. The
second research question aims to deduce from the publications how income transfers are
captured by means of healthcare regulation. In rent-seeking theory, government bestowed
privileges are used to artificially create monopolies and monopoly prices and the aim of this
specific research question is to indentify government privileges that facilitate the capturing of
income transfers in the context of healthcare by means of restricting total supply. The third
research question focuses on how production output is restricted in the context of healthcare
using the government as a dealer of output restrictions with the ultimate goal of increasing the
income of the limited & privileged suppliers. The fourth research questions investigates what the
studies indicate about how the government and/or incumbent government officials are induced to
enact production output restrictions on the healthcare industry. The last research question aims to
provide anecdotal evidence to correlate with the findings and assertions made in this thesis.
1.3.5. Definition of key concepts This study employs the discipline of public choice theory as an explanatory model for market
regulation and government intervention in healthcare. A number of key concepts require a brief
delineation.
8
Community of interest: a conglomerate of actors with similar industrial interests and stakes. In
the context of this thesis this term refers to a conglomerate of cartels between allied industries,
for example when the rubber producer industry, the tire manufacturer industry and the
automobile industry together engage in price-fixing and lobbying for subsidies.
Economic rent: Rent refers to that fraction of the price which is not related to any economic
activity or value. A frequently highlighted example is when a concentrated group of taxi drivers
can charge seven dollars instead of five dollars per ride thanks the elimination of competition
due to licensure. The extra two dollars obtained per ride thanks to the monopoly is called
‘economic rent’. Welfare is reduced as resources are being misallocated in the form of
‘economic rents’ through monopoly pricing without any reciprocal economic gain (Tollison,
2012).
Income transfer: wealth that has been generated through productive economic activity that is
being redistributed to rent-seeking actors without receiving anything in return. For example
when customers pay fixed tariffs for consumption goods and are paying prices beyond the true
market value of that good. Thus, a portion of their economic surplus is directed to a rent-seeking
agent who has managed to capture an income transfer through manipulation of regulation
(tariffs) (Tollison, 2012).
Lobbying: to try to persuade a politician, the government, or an official group that a particular
thing should or should not happen, or that a law should be changed (Cambridge dictionary,
2014).
Production output restriction: government mandated policy and/or legislation which limits the
production of a good or a service. Established market players frequently lobby the government to
impose production output restrictions on the industry under the pretext that if free production is
allowed, the market will ‘saturate’. In economic reality, production output restrictions benefits
the established market players as they can more easily control the total supply and thus operate
as a cartel and introduce monopoly prices. ‘Protectionism’ is an example of a production output
restriction (Tollison, 2012).
Public choice theory: Buchanan & Tullock (1962) pioneered the public choice theory which
provides an economic rationale behind the endorsement of specific policies by special interest
groups. In public choice theory, government intervention is frequently perceived as a tool by
which special interest groups can create new sources of rent by manipulating regulation
(Tollisen, 2012). In this study, rent-seeking relates to this specific activity and not the social
costs of the resources spent on obtaining the source of rent.
Rent-seeking: “The expenditure of resources in order to bring about an uncompensated transfer
of goods or services from another person or persons to one's self as the result of a “favorable”
decision on some public policy. The term seems to have been coined (or at least popularized in
contemporary political economy) by the economist Gordon Tullock. Examples of rent-seeking
9
behavior would include all of the various ways by which individuals or groups lobby government
for taxing, spending and regulatory policies that confer financial benefits or other special
advantages upon them at the expense of the taxpayers or of consumers or of other groups or
individuals with which the beneficiaries may be in economic competition.”(A Glossary of
Political Economy Terms, 2005).
1.4. Chapter division The first chapter of this thesis introduces the background of the issue to be studied and highlights
its societal relevancy. The second chapter elaborates on the theoretical assumptions that guide
this study in combination with complementary anecdotal evidence obtained from the
participatory study. The third chapter describes the method by which the explorative literature
review is conducted and the measures undertaken to ensure a high degree of validity and
reliability. The fourth chapter presents the results and the processed data of the explorative
literature review. Finally, a conclusion is formed based on the data analysis undertaken.
10
2. Theoretical framework and model
2.1. Introduction This chapter deals with the theoretical background of rent-seeking. Before delving into rent-
seeking theory, a brief description of public choice theory is laid out. With regards to rent-
seeking theory, the research questions framed in chapter 1 form the guiding beacons that dictate
which theoretical elements are included in this thesis and are used to answer the research
questions. First, rent-seeking theory is dissected to broaden the scope of the literature search and
to define which studies can be included. Second, rent-seeking theory is employed to provide
assumptions on how income transfers are captured in the context of healthcare. Third, rent-
seeking theory is applied to provide assumptions on how restrictions on production output are
contrived in healthcare. Lastly, rent-seeking theory is used to provide an understanding as to how
rent-seeking agents induce the government to impose production output restrictions on an
industry. Throughout this chapter, relevant examples from the literature within the context of
healthcare are highlighted, including complementary excerpts from the participatory study which
can be found in the appendix.
2.2. Public choice theory This master thesis relies on the domain of public choice theory to interpret healthcare policy.
Public choice theory as pioneered by Buchanon & Tullock (1962) as a complementary branch to
the field of economics to construct explanations as to why economically inefficient policies gain
support in politics. This need had risen amongst economist to explain why policies such as
import quotas and minimum wages receive political support despite being known to decrease
welfare. The idea in short is that, as a result of varying levels of incentives amongst the general
population, concentrated benefit groups tend to participate more intensively in the political
discourse and are frequently successful in getting special interest policies implemented under the
guise of serving the public interest. This is primarily achieved through using the government to
impose production output restrictions or regulation that has production output restrictions as an
intended side-effect. In public choice theory thus, import quotas on foods are introduced thanks
to the lobbying efforts of domestic food producers whilst minimum wages are introduced thanks
to labor unions that set out to protect its members from cheap competition through pricing low
skilled laborers out of the market. The specific act of promulgating and advancing policies that
restrict production output is called ‘rent-seeking’ in public choice theory.
2.3. Rent-seeking dissected Research question 1: What studies have been conducted that explore rent-seeking behavior in
healthcare?
In order to identify studies that explore rent-seeking behavior in healthcare, the parameters of
rent-seeking behavior are briefly explained in this section. The preliminary review with the
keywords “rent-seeking” and “healthcare” using Google Scholar produced few results.
Therefore, the concept of rent-seeking is dissected into several elements which allows for a
broader scope of search terms.
11
Tollison (2012) indicates that rent-seeking is frequently referred to in public choice theory as
government intervention in markets can serve as a tool to deliberately create and maintain new
sources of rent. In order to capture an income transfer, resources are devoted towards contriving
the legal construction under which income transfers can be captured (Tollison, 2012). As rent-
seeking strategy is rooted in output restrictions, prospective market entrants individually spend
resources in order to compete for entry to a market with severe output restrictions imposed by
concession or licensure legislation. In essence it entails lobbying for a monopoly position. This
practice brings economic waste and misallocation in two forms:
1) The total sum of these individual financial inducements in the forms of bribes and
campaign contributions to achieve a monopoly position might actually exceed the macro-
economic value that said concession produces for the single individual who actually
‘wins’ the political award/subsidy. For example: ten individual biochemists prospective
entrepreneurs spend a sum total of a million dollars on lobbying to compete for a single
medical laboratory license in a region which produces a million dollars worth of income
transfers for the single license holder. This means that there is no net gain for society, but
rather that existing wealth is being re-distributed to the license holder and to the lobbied
government official who grants the political award/license.
2) In addition to this, monopoly pricing on its own creates welfare loss as the consumer
surplus is negatively affected.
A crucial difference between rent-seeking and illegal operations such as cartel-forming is that
rent-seeking behavior necessarily requires overt government intervention and thus, though being
unequal and economically inefficient, is upheld by the law (Aligica & Tarko, 2014). Take for
example the case of a domestic supplier of beers that has pulled enough strings to use
government intervention to restrict the import of competing foreign beer. If a prospective market
entrant decides to import beer and circumvents the import restrictions, the new entrant becomes
liable to prosecution and/or litigation by the government or by the established rent-seeking agent
respectively.
Paul & Wilhite (1991) point out that there are costs to rent-defending when players or a coalition
of players spend resources to maintain their source of rent. This is also labeled as ‘rent
protection’ by Tollison (2012) which refers to resources spent by a holder of a source of rent to
sustain government imposed output restrictions in order to benefit the privileged suppliers. From
a rent-seeking perspective, quality and safety regulations in healthcare are designed to serve
protectionist policies rather than actually ensuring quality (Anderson, Halcoussisa, Johnston &
Lowenberga, 2000; Leffler, 1978; Paul, 1984). For the purposes of this study, proposing stricter
quality & safety regulation, lobbying to fight reform and resources spent on sustaining regulatory
capture are accounted for as expenditures to sustain a source of rent.
With regards to income transfers in public health, pubic choice theorist Tollison & Wagner
(1989) hypothesize that pressure for public health interventions might originate from suppliers
12
that want to increase the aggregate demand of their products and services. A similar observation
is made by Welch, Schwartz & Woloshin (2012). Hamowy (2007) and Olson (1965) describe
how medical associations actively lobby to influence national insurance reforms towards the
policies that are most profitable for the members of the association. Similarly, Enthoven (2012)
points out that healthcare coverage policy is heavily influenced by the medical industry’s
ambition to create and sustain a payment vehicle for its services and products. From these
observations and for the purpose of this study, lobbying by the medical industry to influence
universal healthcare coverage legislation or to receive subsidies to take public health measures is
conceptualized as a rent-seeking expenditure for the instrumental use of government intervention
to contrive a source of rent for the services and commodities of risk-neutral entrepreneurs.
Using a more liberal interpretation of rent-seeking theory and related concepts, the first research
question that seeks out the studies that analyze rent-seeking behavior in healthcare thus screens
for publications that include any of the following elements:
1) Medical suppliers manipulating the regulatory environment to generate economic rents
for suppliers.
2) Medical suppliers undertaking activities to control the total industry supply in order to
operate as a cartel.
3) Medical suppliers attempting to influence the government and individual politicians to
grant any of the above.
2.4. Capturing income transfers in healthcare 2) What do the findings of these studies indicate about healthcare policy as a potential tool for
rent-seeking agents to capture income transfers?
Rent-seeking agents aim to capture income transfers. This concept is restricted to public choice
theory and frequently ignored in healthcare policy literature. For example: whilst publications by
the frequently cited American Medical Association point out that licensure exists to protect the
public (Chaudry et al, 2010), in rent-seeking literature licensure is interpreted as a means by
which incumbent suppliers restrict market entry in order to generate economic rent (Tollison,
2012). The purpose of this section is to briefly outline market strategies which are known in
public choice literature to advance rent-seeking agendas and to briefly explain the economic
effects that underpin special interest group support for economically inefficient policies.
For the theoretical part, it is hypothesized that income transfers in healthcare are captured by the
following means:
1) Creating a de facto monopoly by introducing production output restrictions through
occupational licensure in order to achieve monopoly pricing (Leffler, 1978).
2) Suppliers lobbying to incorporate their particular medical commodities and services in
collectively financed remuneration schemes (Hamowy 2007) or public health efforts
13
(Tollison & Wagner, 1989), which for the purpose of this study is coined as: ‘an attempt
to capture an income transfer/subsidy’. Especially amongst paramedics, whose services
frequently fluctuate in and out of reimbursement schemes, the lobbying efforts to capture
a transfer/subsidy can be clearly observed. In healthcare policy literature, the discussion
on which medical services and commodities should be collectively financed is commonly
labeled as ‘priority setting’.
3) Zhou (1995) highlights that rent-seeking actors typically lobby for tariff legislation in
order to avoid pricing wars that may induce some providers to price their products below
the prevailing price.
4) Legislation that obstructs insurers to engage in selective contracting and thereby
facilitates licensed healthcare providers in capturing and securing an economic
transfer/subsidy all the while reducing the bargaining power for third party payers.
The economic rationale behind the medical community of interest’s support for legislation that
prohibits selective contracting is explained in textbox 1.
Textbox 1: Selective contracting
In many countries, once a professional is licensed and obtains a work permit, the third party
payer (insurer) is often legally obliged to enter a contractual agreement for the reimbursement of
the full spectrum of potential services of which the healthcare provider is authorized to perform
and cannot engage in selective contracting i.e. (partially) declining to do business with a specific
healthcare provider. The inability to (partially) decline transactions reduces the bargaining power
for the third party payer and in an economic sense, alleviates the healthcare professional from the
regular competitive pressures of a free market (=subsidy). Selective contracting allows for third
party payers to ‘cherry pick’ efficient healthcare providers or even only specific services at
particular healthcare providers and neglect the rest. Thusly, they can steer their patient
population towards more attractive deals (e.g. with discounts below tariffs) and towards more
efficient providers. The inability to engage in selective contracting consequently obstructs the
third party payer from expedient health output purchase methods (Devers, Casalino, Rudell,
Stoddard, Brewster & Lake, 2003; Johns, 1985). A prohibition on selective contracting can be
interpreted as a means to subordinate consumers (the insurers) to suppliers by significantly
reducing the bargaining power of the health output purchasers.
From a rent-seeking perspective, regulation that obstructs selective contracting can be perceived
as a ‘political award/subsidy’. For example: medical specialists A is 50% less efficient with
procedure X than the average medical specialist. Medical specialists A is still legally entitled to
perform procedure X and receive full reimbursement. Medical specialist A conducts procedure X
simply because the scope of the occupational licensure entitles all medical specialists with that
specific license to perform procedure X and be paid a tariff for it regardless of the comparative
economic efficiency of any particular agent in the pool of licensed suppliers. If prices are paid
for economic activity which yield lower output than the price paid for them (especially when
taking into account opportunity costs), it can be said that a subsidy is being transferred to the
inefficient supplier. Regulation that obstructs selective contracting thus generates income
transfers to rent-seeking agents.
14
2.5. Restricting total production output in healthcare 3) What do the studies indicate about the manner in which rent-seeking agents restrict total
production output in healthcare?
In order for the medical community of interest to effectively form a monopoly and capture
income transfers, restrictions on total output production are required. A production output
restriction limits the amount of suppliers in a market and thereby facilitates monopoly traits with
accompanying monopoly prices. It is also important to note that rent-seeking policies require
deception of the public as in reality, only concentrated groups reap the benefits of production
output restrictions (Tullock, 1989). Aligica & Tarko (2014) point out that rent-seeking
institutions thrive in political climates where populist rhetoric and incoherent government
intervention allows for easy justification of any type of government intervention in the market
and can thus provide an opening for opportunistic rent-seeking agents. For example, a domestic
producer of beers can choose to financially support a patriotic political movement in order to,
once that party is in power, use that party’s rhetoric in the public discourse to sponsor legislation
that introduces import restrictions for foreign beer under the pretext of nationalism. In
healthcare, ‘quality and safety’ regulations serve this purpose (Anderson, Halcoussisa, Johnston
& Lowenberga, 2000; Leffler, 1978; Paul, 1984).
For the theoretical part, it is hypothesized that production output restrictions in healthcare are
achieved primarily by the following means:
a) Lobbying for safety or environmental control promotion in order to raise operational
costs for smaller and less advanced competitors in the market place (Zhou, 1995).
b) Manipulate regulatory process to delay or obstruct issuance of licenses and/or entry to
work at a healthcare institution to prospective entrants (Zhou, 1995). Authors such as
Friedman (1962) and Hamowy (2007) claim that putting a cap on the amount of students
allowed to enroll in medical studies (numerus fixus) is the primary method by which the
American Medical Association has been able to restrict production output and raise
incomes for its members.
c) The practice of goodwill fees amongst medical specialist as barrier to entry and thus a
monopoly strategy (Coopers & Lybrand, 1994).
d) The practice of scope-of-activities monopolies (Young, 1987).
The economic rationale behind goodwill and scope-of-activities monopolies is explained in
textbox 2 & 3.
15
Textbox 2: Goodwill
Within the context of healthcare, there exists speculation that the practice of goodwill fees
amongst general practitioners and medical specialists might have little to do with goodwill fees
in the economic sense, but instead might be a pretext to create an additional barrier to entry
(Coopers & Lybrand, 1994). This observation stems from the fact that goodwill normally refers
to the successor of an asset being required to pay an extra fee to the former owner of the asset
(beyond the value of the asset) based on the asset’s ability to generate future profits. In
healthcare however, many assets are in fact externally acquired intangible skills (through
medical education) and the medical facilities and overhead used often belong to the hospital and
not to the medical specialists (Kok, Houkes, Tempelman, & Poort, 2010). Moreover, amongst
medical specialist in the Dutch Kingdom goodwill fees are not only paid when ownership is
ceded (e.g. a medical specialists who retires and demands a goodwill fee from the appointed
successor for taking over the office and client portfolio), but are also used when new specialist
join an existing partnership. New entrants to the partnership are generally required to contribute
a goodwill fee to the partnership. This is to compensate the other members of the partnership
who are compelled to cede a part of their fee-for-service based market share to the new partner.
For example, a general surgeon who is part of a four men partnership is able to gain 75.000
Euros a year in remunerations for a specific type of throat surgery. If a fifth member who is
specialized in throat surgery enters the partnership and ‘takes over’ all the remunerations
generated by the throat surgeries, the ‘missed’ income over a period of years is estimated and the
new entrant is required to compensate for this with the entrance fee which generally is upwards
of 200.000 Euros. Thus, the goodwill fee may be interpreted as a high entry fee to be allowed to
join in on an established remuneration/subsidy stream that a regional healthcare service delivery
cartel has built up throughout the years.
Textbox 3: Scope-of-activities monopolies
Medical professionals use licensing systems to ‘carve out’ pieces of the market and secure their
source of rent (Blevins, 1995). Blevins (1995) suggest that a harmful effect of medical licensure
is the scope-of-activities monopolies it artificially creates. Consequently, a wide range of
healthcare services are often delivered by overqualified personnel whereas in reality, a
significant portion of the simpler, routine task can be delegated to cheaper paraprofessionals or
medical technicians. This is clearly highlighted by the Dutch post-graduate study ‘tropic
physician’ which includes instructions for surgery in remote and rural areas. Upon return in the
Netherlands however, these same doctors are not allowed to perform these surgeries as the
market share has already been delegated through licensure. Turf disputes between midwives and
gynecologists concerning who is allowed to capture the income transfer concomitant to child
bearing are a clear example of scope-of-activities monopolies artificially produced by licensure
(Young, 1987). Multiple provider groups try to define the scope of the medical activities through
licensure regulation to fit their own income goals and capture the economic transfer. Moreover,
the non-use of paraprofessionals or medical technicians limits the scope of possibilities for
integrated care systems as licensure limits the amount of market players allowed to perform a
specific type of activity, no matter how easy it is to perform (Friedman, 1962).
16
2.6. Inducing the government to impose production output restrictions in
healthcare 4) What do the studies indicate about the manner by which suppliers induce the government to
introduce production output restrictions on the industry?
Rent-sharing: economic and political integration
In rent-seeking theory, lobbying and conflict-of-interest constructions are accounted for as
resources spent in an attempt to secure the source of economic rent (Tullock, 1989). In addition
to this, Aligica & Turko (2014) in their article on crony capitalism and rent-seeking argue that
from the perspective of the rent-seeker, economic and political integration is often a prerequisite
in order to safeguard the investments in the assets, especially from future arbitrary government
intervention. The authors illustrate that the rent-seeking agent shares the source of rent with the
political agent to ensure that the political market as well as the economic market have a mutual
interest in sustaining the artificially created source of rent (e.g. employing family members of
leaders of the patriotic party in the domestic beer company). An example in the context of
healthcare is that of the swine flu scandal, whereby in 2010 it came to light that leading members
of the World Health Organization’s and government officials were in collusion with the
pharmaceutical industry with the ultimate goal to redistribute taxed wealth towards superfluous
vaccination programs and thus share in income transfers obtained (Cohen & Carter, 2010).
Similarly, Bealle (1949) and Mullins (1995) point out that the American Medical Association,
functioning as a political agent, for many years used its ‘seal of approval’ stamp to extort
advertising revenue from pharmaceutical producers to financially benefit the editors of the
Journal of the American Medical Association.
Rent-seeking also includes the costs of regulatory capture (Stigler, 1979) when the holder of a
source needs to spend resources on the regulatory authority in order to safeguard the source of
rent and to deter economic competition through regulation. In healthcare this can be observed in
the context of the ‘revolving door’ between executives of the industry and the authorities that
regulate them (Abraham, 2002) and ‘user fees’ to the Federal Drug Administration for
accelerated approval of pharmaceutical products (Angell, 2009). This is another manifestation of
economic and political integration to facilitate rent-seeking objectives.
Aligica & Turko (2014) point out that the necessity of continuously sharing rent as part of the
phenomenon of economic and political integration introduces a ‘subscription’ element to engage
in rent-seeking behavior where, to sustain a source of rent, continues costs are incurred that are,
in an economic sense, unrelated to production and distribution. Krueger (1974) suggests that the
prospective windfalls for government officials (i.e. shared rent) that can be gained from granting
political awards (e.g. granting subsidies for vaccinations) also induces competition for
employment in government positions. Extending the argument, Krueger (1974) suggests that a
part of the competition for employment in government positions can be designated as attributing
to the societal cost of rent-seeking activity. This is due to the fact that prospective government
17
officials also spend resources to obtain a government position from which economic and political
integration can take place. Government positions that can grant political awards are limited and
thus not all lobbying efforts from all prospective government officials are rewarded. This incurs
extra waste in the paradigm of rent seeking.
An explanation on the investment paradigm of a rent-seeking agent is explained in textbox 4.
Textbox 4: A numerical estimation on the investment value of lobbying expenditures:
Tullock (1989) illustrates a simple example that provides for a numerical estimation as to which
point rent-seeking institutions are willing to increase expenditures on rent-seeking through
lobbying. A domestic producer of steel, faced with competition from foreign steel can choose to
(1) invest in either upgrading their existing steel plant to compete head on with the foreign steel
or (2) invest in lobbying activity to create legislation that obstructs the import of foreign steel.
Confronted with this scenario, Tullock (1989) points out that successful lobbying will be the
preferred course of choice from a rational economic perspective as long as the expenditures on
lobbying are less than the costs of having to invest in an upgrade of the domestic steel plant.
Tullock (1989) argues that in most cases the expenditures on lobbying legislators to impose
production output restrictions as a course of action are a fraction of the expenditures that would
have to be made in the alternative course of action where competition has to be met head on.
Moreover, Tullock points out that buying the favor of legislators in such a case is relatively
cheap due to the following reason: the diffuse cost group, namely the citizen who is being
deprived of his consumer surplus by having to pay higher than necessary prices for domestic
steel, is unlikely to be aware of the conspiracy by the domestic steel producers to use import
restrictions to create a monopoly and capture concomitant income transfers. Furthermore, the
diffuse cost group contains the whole population and the costs are thus thinly spread amongst
individual members. The diffuse costs group is thus unlikely to organize as a political group and
effectively ‘counter-bid’ for political favors from the relevant legislators in order to not introduce
import restrictions.
18
2.7. Theoretical model With the former theoretical concepts taken into account, rent-seeking activity in healthcare is
thus assumed to consist of the following three elements that require endorsement by the medical
community of interest to capture and secure economic transfers:
Table 2.1. Rent-seeking in healthcare
Rent-seeking objective: Strategic manifestation:
1. Healthcare policy regulation supported by
the medical community of interest to facilitate
the capture of income transfers.
1a) Pressuring for income transfers by e.g.
endorsing policies that create economic rent
1b) Pressuring for eligibility for reimbursement
through influencing the scope of state
mandated health insurance package (market
share is being expanded)
1c) Pressuring for subsidies for public health
interventions (WHO vaccinations scandal)
(pre-existing wealth is being redistributed)
1d) Tariffs to alleviate suppliers from
confronting effective price competition (the
prohibition on price-cutting introduces
monopoly rents for suppliers)
1e) Regulation that prohibits selective
contracting as the inability to engage in
expedient health purchase transmutes into a
subsidized income for healthcare providers.
2. Healthcare policy regulation supported by
the medical community of interest to restrict
total production output.
2a) Scope-of-activity monopolies through
occupational licensure.
2b) Goodwill fees as a barrier to entry.
2c) Manipulating the regulatory process to
delay and/or obstruct new entrants to the
market or healthcare institutions.
2d) Using environmental and safety regulations
to raise operational costs for less advanced
competitors.
3. Efforts by the medical community of interest
to induce the government to impose
restrictions on total production output.
Inducements such as:
3a) Campaign contributions.
3b) Bribes.
3c) Conflict-of-interest constructions.
3d) Regulatory capture.
3e) Revolving door between public and private
sector.
3f) Pressure groups.
3g) Political power.
19
3. Methodological framework
3.1. Introduction This chapter describes the methodological method used to conduct this study. First the research
type and design is described. Next, the sources for data and the method of data extraction is
described, followed by the method of data analysis and a description of how an overview of the
findings will be provided. Lastly, the chapter concludes with an elaboration of the internal and
external validity of the study.
3.2. Research type/design Polit & Beck (2008) construct research along two domains: qualitative and quantitative research.
Quantitative research relies on numerical observations and mathematical processing in the form
of statistical data to establish cause and effect relations. Qualitative research is rooted in
investigating intangible phenomena. A further classification of research designs makes a
distinction between explorative, descriptive or explanatory research (Neuman, 2006).
Explorative research ventures into areas where little is known about and aims to refine existing
assumptions. Descriptive research investigates a particular established phenomenon with
statements and figures. Explanatory research aims to evaluate cause and effect relationships and
contribute, test or challenge existing theories.
Preliminary research on the topic indicates that the amount of data available on this topic is
limited. The design of choice is a qualitative, explorative study conducted through a explorative
literature review in order to obtain an overview of the available knowledge in the literature on
rent-seeking behavior in healthcare. A Systematic literature review is designed to collect
adequate studies conducted on a domain of interest in order to gain an overview of the available
evidence on a topic (Aveyard, 2010). The method by which evidence is collected from the
literature and appraised is done in a pre-defined, systematic manner which specifies the range of
search terms, the databases employed and the selection criteria for inclusion for analysis
(Aveyard, 2010). The purpose of this study is to gain a better understanding on rent-seeking in
healthcare by means of available literature on the topic. The research ventures into undefined
areas and can thus be designated as being an explorative literature review. The parameters of the
explorative literature review are described in the next section.
3.3. Data collection This section describes the transmutation of the concepts presented in the theoretical framework
into a fixed set of search terms (keywords). Table 2 presents an oversight of the keywords. The
explorative literature review will be performed in two data bases: ‘EBSCO host’and ‘Science
Direct’. These two databases include academic publications from multiple disciplines including
economics and healthcare. The decisive factor to opt for these two databases is attributed to the
mix of economic, healthcare and management literature that these databases contain, as opposed
to exclusively biology (e.g. Pubmed) or economy oriented databases. Upon a tentative search
20
with the keywords these databases provided relevant publications. With the exception of Google
Scholar, other sampled databases did not provide relevant findings.
Table 3.1. Concepts and corresponding keywords
Concept: Keywords:
Healthcare policy regulation supported by the
medical community of interest to facilitate the
capture of income transfers.
Public choice, rent-seeking, selective
contracting, tariffs, price fixing, floor prices,
monopoly, cartel, subsidy, anti-trust, priority
setting
Healthcare policy regulation supported by the
medical community of interest to restrict total
production output.
Public choice, rent-seeking, protectionism,
barrier-to-entry, licensure, concession,
goodwill, turf protection, turf war, turf conflict,
scope-of-activity monopoly, limit competition,
restrict competition, numerus fixus, medical
student admittance cap, market saturation
Efforts by the medical community of interest to
induce the government to impose restrictions
on total production output.
Public choice, rent-seeking, lobby, regulatory
capture, revolving door, conflict-of-interest,
financial ties, bribery, campaign contributions,
special interest group, political power, pressure
group
The following keywords are used to restrict the search results to the domain of healthcare policy:
Table 3.2. Restrictive keywords
Conjoining restrictive keywords:
Healthcare
Medical care
The results per keyword search will be sifted with by means of a rudimentary selection process.
Initially, coarse filtering criteria will be applied whereby only titles -and if necessary abstracts-
are screened to evaluate whether the search engine hits are relevant. This can be determined by
the topic and title of publications. In addition, the search engine hits are screened on whether or
not they are written from a public choice theory perspective and take into account the workings
of the political market. This constitutes the preliminarily eligible batch for inclusion in the
explorative literature review.
Next, a more refined selection process will be undertaken using an inclusion form with pre-
defined inclusion and exclusion criteria to determine which studies that turn up in the search
results are included for data analysis on rent-seeking behavior in healthcare.
21
The inclusion criteria are:
1. The topic of the publication relates to influencing policy making in healthcare. Though
rent-seeking consist out of abstract economic concepts, it is necessary for the purpose of this
study to restrict the information obtained to the context of healthcare in order to ensure that the
obtained information can be adequately interpreted within this context.
2. The publication has to contain the keywords ‘lobbying’, ‘healthcare’ or synonyms. This
is necessary to ensure that the publication takes into account the workings of the political market
(public choice) in the context of healthcare policy.
3. The study is written in English. The jargon used throughout public choice theory is derived
from English terms (e.g. economic rent). To ensure that such highly specific terms can be used to
find relevant articles that attribute similar meanings to the highly specific terms, the choice is
made to restrict the included publications to the English language.
4. The study is published in an academic journal. The articles need to be of academic origin.
This is to ensure that the articles included in the study address the topic from a scientific
perspective. The articles need to be published in a peer-reviewed scientific journal.
5. The full text of the study is available. The articles need to be read to obtain information on
rent-seeking. Not all search results in the databases provide actual access to the full articles.
Abstracts alone are not enough.
The exclusion criteria are:
1. The topic of the publication does not relate to capturing income transfers, restricting
supply or inducing government officials to enable any of the former. Publications containing
the world ‘lobbying’ and ‘healthcare’ can cover a wide variety of topics e.g. patient
organizations lobbying for more patient empowerment in the healthcare sector. The studies need
to provide insight on the political market in the context of healthcare policy and thus need to
elements from public choice theory as described in chapter 2 of this thesis.
2. The publication does not contain the keywords ‘lobbying’, ‘healthcare’ or synonyms.
3. The publication is in a language other than English.
4. The full text of the study is unavailable.
22
Figure 3.1. Methodological steps:
3.4. Data analysis In this section, the method of data analysis for each research question is described. The research
questions are subsequently used as base to define the parameters of a data matrix that provides an
overview of the findings as deemed relevant in order to answer the research questions. The
matrix and it parameters is presented in the last part of this section.
3.4.1. Data analysis research question 1 1) What studies have been conducted that explore rent-seeking behavior in healthcare?
The first research question is attended to by means of the publications found in the two databases
after the initial keyword searches. A search protocol will be applied to record the data and
database of entry for each combination of keywords followed by a numerical recording of the
results. These results i.e. search engine ‘hits’ are all screened on titles. Consequently, the
possibly relevant publications are extracted. Next, the list of possibly relevant publications is
assessed through the abstracts using the inclusion form. In case no abstract is available or in case
the abstract does not provide closure on whether or not the publication meets the inclusion
criteria, the full text is screened for a conclusive judgment. The list of publications that are
approved by means of the pre-defined criteria in the inclusion form is also the answer to the first
research question.
1
• Search engine hits filtered on titles and topic (only titles and abstracts)
• Search engine hits filtered on whether or not the article incorporates a public choice theory perspective and takes into account the workings of the political market (only titles and abstracts)
2
• Inclusion criteria using the inclusion form as presented in appendix 3. Thourhgout this part, titles, abstracts and parts of full text will be consulted
3 • Final batch of articles that will be included in the study to gain insight
on rent-seeking in healthcare
23
3.4.2. Data analysis research question 2 2) What do the findings of these studies indicate about healthcare policy as a potential tool for
rent-seeking agents to capture income transfers?
The second research question strives to extract from the included studies how income transfers
are captured through influencing healthcare policy and regulation. The included studies, which
must include the words ‘lobby’ and ‘healthcare’ or synonyms, are screened for indications of the
medical community of interest attempting to influence regulation that produces financial benefits
for the medical community of interest. Activity described in the articles that increases or sustains
the income for the medical community of interest through legislation is noted down in the
content matrix. More concretely, an attempt is made to gain information on how rent-seeking
agents in healthcare succeed in redistributing existing wealth. The overarching concept here is
the contriving of regulation that produces economic rent for suppliers combined with the use of
regulation to obtain existing wealth (subsidies). Next, the collected information is presented in a
readable form and in this manner also providers the answer for research question 2.
3.4.3. Data analysis research question 3 3) What do the studies indicate about the manner in which rent-seeking agents restrict total
production output in healthcare?
The third research question investigates how restrictions on total production output are
effectuated by the medical community of interest. The included studies, which must include the
words ‘lobby’ and ‘healthcare’ or synonyms, are screened for indications of legislation that
obstructs free entry into the market or restricts competition between established suppliers.
Moreover, covert forms of total production output restrictions such as forming a cartel or
demanding goodwill fees are also sought for. Activity described in the articles that restricts total
production output through legislation to generate rents for incumbent suppliers is noted down in
the content matrix. Next, the obtained information is presented in a readable form and in this
manner also provides the answer to research question 3.
3.4.4. Data analysis research question 4 4) What do the studies indicate about the manner by which suppliers induce the government to
introduce production output restrictions on the industry?
The fourth research question considers the element of economic and political integration (rent-
sharing). The included studies, which must include the words ‘lobby’ and ‘healthcare’ or
synonyms, are screened for indications of the medical community of interest using realpolitik
leverage instruments to induce the government to enact legislation that restricts total production
output. The findings are noted down in the content matrix and subsequently presented in
readable form. In this manner, an answer is provider for research question 4.
24
3.4.5. Data analysis research question 5 5) What anecdotal evidence does there exist on the practice of rent-seeking within the context of
Curaҫao?
The fifth research question aims to provide relevant documentation from the Curaҫao healthcare
market context and to mirror this as much as possible to the theoretical framework and
corresponding keywords used throughout this thesis. The anecdotal evidence is gathered through
informal interviews and by going through archival documents and correspondence at the social
insurance bank in Curaҫao. Next, the findings are presented in a readable form together with
corresponding excerpts of original documents in the appendix. In order to identify the similarities
between the articles from the literature review and the documents from the participatory study,
relevant citations of the literature studies accompany the documents from the participatory study
where applicable. In this manner, an answer is provided for research question 5.
3.4.6. Content matrix The research questions require included studies to be summarized and presented according to a
multiple parameters to provide an overview of the findings. Besides identifying the study, the
parameters follow the contours of the theoretical framework as laid out in chapter 2 of this thesis.
In the results chapter, the content matrix will be presented with checkmarks. In appendix 4, a
thick version of the context matrix will be presented with supporting citations from the articles in
question.
Table 3.3. Example data matrix Study: Type of rent-seeking behavior studied:
1a) pressuring for
income transfers
1b) pressuring for
eligibility for
reimbursement
1c) pressuring for
subsidies for public
health interventions
1d) pressuring for
tariffs
1e)
obstructing
selective
contracting
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
x x
2. X et al. (2004) x
Study: Type of rent-seeking behavior:
2a) Scope-of-activity
monopoly
2b) Goodwill as a
barrier to entry
2c) Manipulating
licensing procedure
2d) Safety regulations
to increase cost for less
advanced competitors
1. Anderson,
Halcoussis, Johnston &
Lowenberg (2000)
x x x
2. X et al. (2004) x
Study: Rent-seeking behavior:
3a) campaign
contributions
3b)
bribes
3c) conflict-of-
interest
constructions
3d)
Regulatory
capture
3e)
Revolving
door
3f)
Pressure
groups
3g)
political
power
1. Anderson,
Halcoussis,
x
25
Johnston &
Lowenberg
(2000)
2. X et al.
(2004)
x x
3.5. Validity Validity of a research method relates to whether or not the selected research tools actually
measure what they claim to measure. Neuman (2006) conceptualizes validity as consisting of
internal and external validity. Internal validity refers to absence of errors in the research design
whereas external validity relates to whether or not the findings can be generalized beyond the
studied population. Construct validity entails whether or not the instruments selected reflect the
concept that is being researched (Messick, 1995). Content validity assigns to validate whether
the instruments employed reflect all dimensions of a social construct that is being measured.
To increase validity, this explorative literature review uses a fixed set of keywords for search in
two databases. Multiple combinations of the keywords and synonyms are noted in a search
protocol and used to broaden the base of search. To further increase the validity of the research,
the included studies are narrowly defined through a fixed set of inclusion and exclusion criteria.
The construct validity is increased by ensuring that the instruments for data extraction described
in the method correspond adequately with the theory that is being tested as laid out in chapter 2.
A coherent use of public choice theory jargon is used throughout the study, in particular between
chapter two (theory) and chapter four (results). In addition to this, the data matrix duplicates the
theoretical model. Three separate data matrixes are used that reflect the theoretical underpinnings
as laid out in chapter two of this thesis and are in the sequence of research questions as laid out
in chapter one of this thesis. This serves to sustain the logical interaction between public choice
theory and observations made from healthcare policy through the included publications. The
content validity is somewhat limited; as lobbying and rent-seeking are not overt operations,
measuring the dimensions becomes subject to interpretation of the authors of the included
studies. The external validity is rather limited; the findings may not be generalizable across
varying jurisdictions or healthcare systems.
3.6. Reliability Shipman (1997) conceptualizes reliability as the ability of the research design to produce the
same results when it is performed again at a different time or by different researchers. The
systematic approach of the literature research, the accompanying pre-defined search increases the
reliability of this study. The search results for both databases with varying combinations of
keywords will be recorded by date and with corresponding search results (number of results per
combination of keywords per database). The parameters of the data analysis is pre-defined and
reflects theoretical elements of rent-seeking theory as laid out in chapter 2. The data analysis is
also pre-defined for each research question, allowing for reproducibility of the steps undertaken
in the analysis. The reliability of this study is affected by the fact that the data gathered is
inherently dependent on the interpretation of the authors of the included articles on rent-seeking
26
behavior. Adding on to this, the results becomes subject to the interpretation bias of the
researcher of this thesis. To mitigate this risk, the explorative literature study will make use of a
thick content matrix in which observations from the included literature that corresponds with
rent-seeking theory will be noted down. Direct citations from the included articles will be
presented in this thick matrix to allow the reader to interpret the citation (appendix 4). This
reduces interpretation bias, as readers can independently verify the cohesiveness of statements
made. This systematic approach and recording of the investigations serves to ensure that this
study attains to a high level of reliability.
27
4. Results
4.1. Introduction This chapter presents the results per research questions. The first part depicts the findings of the
explorative literature search. Subsequently, the first four research questions are answered. Lastly,
the chapter concludes with the findings of the participatory study with the anecdotal evidence
collected.
4.2. Search results The search in databases Science Direct and EBSCO host was conducted between 20 and 28
th of
May 2014. The search in database EBSCO host was further narrowed down to sub-databases
CINAHL, EconLit & Medline as the other databases concerned domains beyond the scope of
this research. Science Direct provided 4206 hits whereas EBSCO host provided 21959 hits. A
detailed overview of the results per keyword per database can be viewed in appendix 1. Upon
publication title screening of the hits and subsequent elimination of duplicates, 82 possibly
relevant articles were extracted in total (appendix 2). The main method by which articles could
be discarded was by judging the titles and scroll over the articles that did not remotely relate to
healthcare (e.g. rent-seeking in the coal mine industry). The next filter criteria was to consider
whether the titles (or in some cases the abstracts) indicated if the article considered the
economics of the political market in the context of healthcare policy. Articles such as ‘physicians
lobbying for higher quality of care’ were also discarded as they did not include the economic
paradigm of concentrated benefit groups seeking to obtain economic rent through regulation.
Using the aforementioned coarse filtering criteria to sift through large amounts of irrelevant hits,
82 potentially relevant articles eventually surfaced in total. These titles were reviewed in more
detail, by means of reading the abstracts and if necessary, parts of- or the full text. This part of
the review made use of the inclusion criteria as presented in chapter three of this thesis. The
inclusion form can be consulted in appendix 3. Of these 82 articles, 27 (33%) were included as
they adhered to the pre-defined inclusion criteria.
Both databases provided relevant articles, though EBSCO host provided a larger amount of hits.
However, EBSCO host did also provide more irrelevant findings combined with a high amount
of articles of which the full text was not available. Moreover, EBSCO host frequently provided
newspaper clippings and editorials which, though relevant, did not meet the criteria ‘published
scientific paper’. The keywords public choice theory and rent-seeking produced only two results.
Most keywords did not provide relevant results and the majority of the relevant articles surfaced
by use of the keywords ‘licensure’, ‘turf’, ‘barrier to entry’ and ‘protectionism’. A noticeable
portion of the potentially relevant articles evolved around the turf wars between nurse
practitioners and physicians, though 19 (23%) had no full text available and were excluded for
further investigation, leaving only a few articles on this topic in the final 27 included studies.
Four articles had relevant titles and text on price-fixing in healthcare, but were newspaper
28
excerpts. The same was true for three articles concerning the drug industry. Another four articles
considered a different type of turf conflicts, in particular radiology testing privileges. These
articles, however, were news bulletins and editorials. In total, 24 (29%) articles did not meet the
criteria ‘academic publication’ Three articles included public choice jargon in the context of
healthcare, but two were encyclopedia articles and one linked to a database to which the
researcher had no access. Another three (3.7%) were not available in English. Two articles
related to goodwill fees, but did not meet the topic at hand. Some articles that included all the
keywords described only the pretext under which rent-seeking activity is undertaken, e.g. ‘a call
for stricter regulation to increase quality’ and were discarded as well since they did not consider
the production output restriction paradigm which is the focus of this research (inclusion form
criteria #1). 19 (23%) of the potentially relevant articles did not meet the topic criteria. A full
overview of inclusion form as applied to each potentially relevant article can be found in
appendix 3.
Figure 4.1. Flowchart of included articles
1:26165 hits
•4206 hits from Science Direct + 21959 hits from EBSCO host filtered on titles and topic (only titles and abstracts)
•Search engine hits filtered on whether or not the article incorporates a public choice theory perspective and takes into account the workings of the political market (only titles and abstracts)
2: 82 relevant
•Throughout this part ,82 hits (appendix 2) were screened on their title, abstracts and parts of full text using the inclusion form (appendix 3) to determine eligibility for further analysis.
3: 27 included
•After the application of the inclusion form (appendix 3) to these 82 articles, 27 made it to the final batch of articles that are included in the study to gain insight on rent-seeking in healthcare
29
4.3. Results Research Question 1 What studies have been conducted that explore rent-seeking behavior in healthcare?
The next step undertaken was to create an overview of the content of the included studies. First,
a table with the identification data and summary of the included articles is provided (table 4.1).
Table 4.1. included studies: Study # &
Authors
Title Publication
year
Country Study type Topic
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
Regulatory barriers
to entry in the
healthcare industry:
the case of
alternative medicine
2000 U.S.A. Empirical
testing
Cross-state
empirical
analysis to test if
mainstream
physicians’
incomes are
higher in states
with
more restrictive
regulations
governing the
practice of
homeopathy
2. Andrews
(1986)
Health Care
providers: the Future
Marketplace and
regulations
1986 U.S.A. Narrative
review
Expansion of
nurse’s role and
the forces that
obstruct this
3. Baer
(1989)
The American
dominative medical
system as a
reflection of social
relations in the larger
society
1989 U.S.A. Narrative
review
Medical
pluralism
towards a
dominative
medical system
in as a reflection
of American
Society
4. Chu
(2008)
Special Interest
Politics and
Intellectual Property
Rights: an Economic
Analysis of
Strengthening Patent
Protection in the
Pharmaceutical
Industry
2008 U.S.A. Theoretical
framework
construction
Pharmaceutical
industry
distorting patent
legislation to
create and
sustain
monopolies
through
financially
inducing
legislators
(lobbying)
5. Cimasi
(2008)
The Attack on
Ancillary Service
Providers at the
Federal and State
Level.
2008 U.S.A. Case study debate
concerning
competition for
the
technical
component
revenue streams
and the
surrounding turf
war between
physicians and
hospitals
6. Cohen & Promoting the nurse 1997 U.S.A. Discussion Discusses the
30
Juszczak
(1997)
practitioner role in
managed care
issues that
managed care
poses for nurse
practitioners
7. Cramer,
Dewulf &
Voordijk
(2013)
The barriers to
govern long-term
care innovations:
The paradoxical role
of subsidies in a
transition program
2013 The
Netherlands
Case study
To explore the
barriers to
govern the
scaling-up of the
long-term care
innovations
8. de Voe &
Short (2003)
A shift in the
historical trajectory
of medical
dominance: the case
of Medibank and the
Australian doctors’
lobby
2003 Australia Case study The medical
association as a
pressure group
rather than a
corporate partner
during social
insurance reform
9. Dickerson
&
Cambpbell-
Heider
(1994)
Interpreting Political
Agendas from a
Critical Social
Theory Perspective
1994 U.S.A. Theoretical
framework
construction
Scrutinizing
policy proposals
from the
American
Medical
Association
using the Social
theory of
Habermas
10. Gravelle
(1985)
Economic analysis of
health service
professions: A
survey
1985 England Literature
survey
to provide an
introduction
for non-
economists,
especially
medical
sociologists,
to the way in
which
economists have
analyzed
professions
in the health
service
11. Gualda,
Narchi & de
Campos
(2013)
Strengthening
midwifery in Brazil:
Education, regulation
and professional
association of
midwives
2013 Brazil Case study Describes
Brazilian
midwives'
struggle to
establish their
professional field
in the arena of
maternal and
child health in
Brazil
12.
Gunderman
& Tawadros
(2007)
The Perils of
Protectionism
2007 U.S.A. Discussion
paper
Discuss the turf
conflicts
between niche
specialist and
general hospitals
concerning who
is allowed to
capture
technological
component
revenues
13. Kelner , Responses of 2004 Canada Case study Case study of
31
Wellman,
Boon &
Welsh
(2013)
established
healthcare to the
professionalization
of complementary
and alternative
medicine in Ontario
economic
conflict between
similar industries
14. Krauss,
Ratner &
Sales (1997)
The antitrust,
discrimination, and
malpractice
implications of
specialization
1997 U.S.A. Legal
consideration
Assesses the
ramifications of
psychologist
specialization
with regards to
anti-trust laws.
15. Landers
& Seghal
(2004)
How Do Physicians
Lobby Their
Members of
Congress?
2000 U.S.A. Survey Tactics of
physicians to
shape health
policy
16. Landers,
Ashwini &
Sehgal
(2000)
Health care lobbying
in the United States
2004 U.S.A. Archival study examines the
efforts of health
care
organizations
to influence
policy decisions
by lobbying
lawmakers
17. Leffler
(1978)
Physician licensure:
Competition and
monopoly in
American medicine
1978 U.S.A. Empirical
modeling
To investigate
whether
licensure is a the
result of
monopoly
seeking or the
result of rational
consumer
demand for
minimum
standards of
quality
18.
Moynihan
(2009)
Doctors and drug
companies: Is the
dangerous liaison
drawing to an end?
2009 Germany Case study Scrutinizes the
relationship
between
physicians and
the
pharmaceutical
industry
19. Mullinix
& Bucholtz
(2009)
Role and quality of
nurse practitioner
practice: a policy
issue
2009 U.S.A. Narrative
review
Expansion of
nurse’s role and
the forces that
obstruct this
20. Page
(2004)
How physicians'
organizations
compete:
protectionism and
efficiency
2004 U.S.A.
Constructing
theoretical
framework
Competitive
strategies of
physician’s
organizations
21. Reilly &
Santerre
(2013)
Are Physicians Profit
or Rent Seekers?
Some Evidence from
State Economic
Growth Rates
2013 U.S.A. Empirical
modeling
The relationship
between the
amount of
physicians and
economic growth
22. Riemer-
Hommel
(2002)
The changing nature
of contracts in
German health care
2002 Germany
Case study Describes
various structural
changes in
contractual
relationships in
32
the German
healthcare
system
23. Schetky
(2008)
Conflicts of Interest
Between Physicians
and the
Pharmaceutical
Industry and Special
Interest Groups
2008 U.S.A. Discussion
paper
Conflicts of
Interest Between
Physicians and
the
Pharmaceutical
Industry and
Special Interest
Groups
24. van den
Bergh &
Faure (1991)
Self-regulation of the
professions in
Belgium
1991 Belgium Case study Economic
knowledge is
applied to the
self-regulation of
the Belgian
public
professional
bodies.
25. White J.
(2013)
Budget-makers and
health care systems
2013 U.S.A. Narrative
review
Healthcare
budgeting and
concomitant
influence of
pressure groups
26. White
W.D. (1987)
The introduction of
professional
regulation and labor
market conditions;
Occupational
licensure of
registered nurses
1987 The
Netherlands
(though
content
concerns
only U.S.A.)
Empirical
modeling
Examines the
introduction of
mandatory
licensing laws to
replace public
certification of
registered nurses
at the state level
27. Young
(1985)
The competition
approach to
understanding
occupational
autonomy *:
Expansion and
control of nursing
service
1985 U.S.A. Case study Nursing’s
acquisition of
autonomy is
examined from
the perspective
of an
occupational
interest group
competing with
other
occupational
interest groups
for a market
monopoly
General overview:
Table 4.1 indicates that of the included studies, one was published in the seventies, five in the
eighties and four in the nineties. The majority of the articles were published between 2000 and
2010 (a total of 13) and another four between 2011 and 2014. The bulk of the included articles
were published in the United States (18). Another 2 were published in the Netherlands and
another 2 in Germany. Australia, England, Canada, Brazil and Belgium each provided 1 relevant
article for inclusion. The most common study type was the case study (9), followed by the
33
narrative review (4), theoretical framework construction (3), empirical modeling (3) and
discussion paper (3). Legal consideration, survey, archival study, literature survey and empirical
testing each appeared once. 23 of the articles concerned providers (service delivery) whilst three
of the articles concerned the pharmaceutical industry (commodities) and one article concerned
the whole healthcare system. The articles varied substantially in topics and format, but did
provide in-depth understanding of the application of rent-seeking theory in healthcare. Two of
the included articles, namely Anderson, Halcoussis, Johnston & Lowenberg (2000) and Leffler
(1978), were already known to the researcher and consulted previously when constructing the
research proposal and the theoretical framework. Using the methodology and pre-defined
keywords as described in chapter three of this thesis, these two articles surfaced, passed the
screening and adhered to all the inclusion criteria and were thus also included for analysis.
34
4.4. Results Research Question 2 What do the findings of these studies indicate about healthcare policy as a potential tool for rent-
seeking agents to capture income transfers?
The included articles were analyzed using the theoretical framework described in chapter 2. For
the second research question, the findings are presented in table 4.4.1. followed by a description
of the findings.
Table 4.2. Capturing income transfers Study: Type of rent-seeking behavior studied:
1a) pressuring for
income transfers
1b) pressuring for
eligibility for
reimbursement
1c) pressuring for
subsidies for public
health interventions
1d) pressuring for
tariffs
1e)
obstructing
selective
contracting
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
x x
2. Andrews
(1986)
3. Baer (1989) x
4. Chu (2008) x
5. Cimasi (2008) x x x
6. Cohen &
Juszczak (1997)
x
7. Cramer,
Dewulf &
Voordijk (2013)
x
8. de Voe &
Short (2003)
x
9. Dickerson &
Cambpbell-
Heider (1994)
x
10. Gravelle
(1985)
x x x x
11. Gualda,
Narchi & de
Campos (2013)
x
12. Gunderman
& Tawadros
(2007)
x x x
13. Kelner ,
Wellman, Boon
& Welsh (2013)
x
14. Krauss,
Ratner & Sales
(1997)
x
15. Landers &
Seghal (2004)
16. Landers,
Ashwini &
Sehgal (2000)
x
17. Leffler
(1978)
x
18. Moynihan
(2009)
35
19. Mullinix &
Bucholtz (2009)
x
20. Page (2004)
21. Reilly &
Santerre (2013)
x
22. Riemer-
Hommel (2002)
x
23. Schetky
(2008)
24. van den
Bergh & Faure
(1991)
x x x
25. White J.
(2013)
x
26. White W.D.
(1987)
x
27. Young (1985) x x x
Total: 16 9 4 3 1
1a) Pressuring for income transfers: Of the included articles table 4.2 demonstrates that 16
articles indicated that the medical community of interest pressures for redistribution of existing
wealth primarily by influencing the allocation of public funds and by creating monopolies to
extract economic rent. de Voe & Short (2003) and White J. (2013) indicate that the medical
community of interest plays a large role in the political allocation of public funds (tax financed
healthcare and educational grants). Moreover, Anderson, Halcoussis , Johnston & Lowenberg
(2000), Cohen & Juszczak (1997) and Leffler (1978) find that government subsidies c.q.
Medicare/Medicaid create rents for physicians whose incomes are protected from competition
from alternative providers. An article concerning the role of subsidies in long-term care in the
Netherlands by Cramer, Dewulf & Voordijk (2013) stated: “The problem is that once a project
manager of an organization is aware of a subsidy, he/she will apply for it no matter if it fits to
the organizational vision.” Kelner, Wellman, Boon & Welsh (2004) also point out that the
medical profession as a dominant structural interest obstructs the diversion of government funds
towards complementary & alternative medicine education and research programs. In addition to
this, the authors mention that alternative practitioners are typically excluded from tax funded
insurance schemes by the dominant medical structure. Eight of the included articles indentified
licensure as the key tool to restrict supply and raise income (monopoly rents) of established
suppliers, namely Andrews (1986), Dickerson & Cambpbell-Heider (1994), Mullinix & Bucholtz
(2009), White W.D. (1987), Anderson, Halcoussis , Johnston & Lowenberg (2000), Gravelle
(1985), van den Bergh & Faure (1991) and Leffler (1978). Anderson, Halcoussis , Johnston &
Lowenberg (2000) explain that licensure creates monopoly rents and state: “Medical licensure
creates a barrier to entry into the medical profession. Like any other regulatory entry barrier,
licensure has the effect of cartelizing the industry, generating rents for incumbent practitioners”
White (1987) notes: "Mandatory laws will impose binding constraints on the division of labor if
they force consumers or employers to substitute licensed personnel for unlicensed personnel.
Holding the level of final output and the quality of services fixed, laws will tend to increase the
wages and employment of licensed personnel and decrease the wages and employment of
unlicensed workers, while the overall impact will be to increase the price of output." A
36
summarizing conclusion on monopoly rents can be found in the article by Leffer (1978) in which
he submits the view that: “physicians desire licensure in hopes of short- or long-run rents.”
1b) Pressuring for eligibility for reimbursement: With regards to pressuring for
reimbursement, nine articles highlighted the capturing of income transfers through pressuring for
eligibility for reimbursement. Landers, Ashwini & Sehgal (2000) and Landers & Seghal (2004)
point out that the bulk of lobbying efforts by physicians are aimed at increasing or maintaining
reimbursement levels. Cohen & Jusczak (1997) submit the argument that the existing
remuneration systems do not adequately reflect the input of nurse practitioners. The authors
indicate that fee-for-service remuneration systems are tailored exclusively towards medical
specialist, even if the whole operation is performed by nurse practitioners who are not
compensated on a fee-for-service basis. The article alludes to the fact that nurse practitioners
cannot independently apply for remuneration due to prevailing legislation (Cohen & Jusczak,
1997). Similar observations are made by Dickerson & Cambpbell-Heider (1994). Gualda, Narchi
& de Campos (2013) describe the struggle of midwifery versus nursing and physician
associations with regards to subsuming the remuneration streams concomitant to child birth.
Gunderman & Tawadros (2007) describe the struggle between free standing niche clinics and
hospitals with regards to conquering remuneration streams for technical component services c.q.
radiology. Kelner, Wellman, Boon & Welsh (2013) point out that suppliers of substitute service
c.q. alternative & complementary medicine are obstructed from entry into reimbursement
streams. A case study of the lobbying activity of the Australian Medical Association by de Voe
& Short (2003) highlights how the medical community of interest orchestrates hostile responses
towards social insurance reform that threaten reimbursement streams. Gravelle (1985) and
Young (1985) mention that lobbying for maintaining or increasing reimbursement is one of the
core activities of medical associations. Cimasi (2008) find that large hospitals influence
reimbursement regulation to limit competition from free-standing niche clinics with regards to
technical component revenue streams (e.g. radiology).
1c) Pressuring for subsidies for public health interventions: Two of the included articles
indicate that the medical community of interest has incrementally absorbed naturally occurring
activities under the umbrella of medical therapy or public health. Young (1985) highlights that in
many countries, childbirth has been subsumed by the medical community of interest. Extending
the argument, Young (1985) points out that: “The broadening of medicine to include treatment
of broad social conditions such as aging, alcoholism, and juvenile delinquency is clearly market
expansion.” White (2013) finds that: “need is created in the media through continual promotion
of supposed medical progress. Individual and social difficulties are medicalized, as when U.S.
students who do not pay attention in school were redefined as victims of attention deficit hyper-
activity disorder. Advertising spreads “awareness” of medical conditions. Campaigns for
prevention often justify and induce more services, such as anti-cholesterol medication.”
Gravelle (1985) provides the example of physicians lobbying for state funded insurance
programs for low income groups under the pretext of public health principles (universal access to
37
care) in order to create new opportunities for the capturing of income transfers. Taking into
account the fact that such measures increase demand without increasing supply (i.e. total
production output restrictions are still in effect), it can be stated that such policies constitute
income transfers; pre-existing wealth is being redistributed under the pretext of public health
necessity towards closed markets.
1d) Pressuring for tariffs: Three articles indicated that the medical community of interest
prohibits price-cutting amongst cartel members (van den Bergh & Faure, 1991: Gravelle, 1985;
Gunderman & Tawadros, 2007). This cartel strategy is sometimes transmuted into legally
binding tariffs. Three of the included studies considered ‘professional ethics’ regulation by
professional associations as an instrument to deter intra-professional price competition. Gravelle
(1985) and van den Bergh & Faure (1991) acknowledge that one of the key pillars in
‘professional ethics’ is the prohibition on (price) advertising. Though presented under the pretext
of avoiding ‘commercialization’ of the profession and protecting consumers, the authors assert
that the true motive is to prohibit cartel members from engaging in price cutting. For example:
van den Bergh & Faure (1991) mention that pharmacist associations claim to serve a social
function subject to ethical rules and placed above the regular economic facts of price-
competition. These rules serve to withhold the consumer of taking into account price differences,
meaning that there will be a level of indifference to choosing one supplier over another. So
being, all suppliers that have been able to gain entry to the closed market constitute more or less
an equal choice of consumption for the consumer on the pricing parameter. This serves to protect
inefficient suppliers from price competition and reduces the necessity to invest in competitive
innovations to keep up with other, more competitive suppliers. A prohibition on price-cutting
thus increases net-profit for the cartel members as a whole. Ethical rules that set minimum prices
for services are, according to van den Bergh & Faure (1991), “the ultimate restrictions on intra-
professional competition.” Similarly, Gunderman & Tawadros (2007) point out that medical
associations apply strict sanctions if individual cartel members divert from the price-fixing
agreements. A cartel prohibits price-cutting through a variety of coercive means as mentioned
above. Under the condition of successful lobbying efforts, tacit prohibitions on price-cutting
transmute into legally binding tariffs for all suppliers within an industry.
1e) Obstructing selective contracting: One of the included articles (Riemer-Hommel, 2002)
concludes that the German sickness funds were duped by regulation that prohibited selective
contracting, stating: “The sickness funds have experienced a change in the definition of their
role, once an active player negotiating individual contracts they have become a passive payer
bound by collective agreements.” The article goes on to state that the medical community of
interest in Germany is typically in favor of legislation that prohibits selective contracting by the
sickness funds.
Other: Four additional methods of capturing income transfers surfaced during the literature
review. They are the following:
38
1. Allowing for supplier-induced demand
One of the included articles (Reilly & Santerre, 2013) elaborate on whether or not physicians are
rent-seekers and point at the phenomenon of ‘supplier-induced demand’ as a way for physicians
to obtain rent.
2. Forcing niche clinics to pay taxes to compensate larger hospitals for provided charity
care
One of the included articles (Cimasi, 2008) notes that New Jersey hospitals made use of a tax
whereby physicians that own free standing clinics are required to pay taxes to compensate large
hospitals for the charity care that the large hospitals provide. Involved physicians remain
uncompensated whilst the hospitals are often fully reimbursed for the same patients.
3. Controlling technical component revenue streams
Two of the included articles highlighted the disputes accompanying technical component
revenue streams. Cimasi (2008) finds that income transfers are captured by means of fighting
over who obtains technical component revenue streams c.q. hospitals and niche providers
disputing diagnostic testing privileges. In an article about turf conflicts for radiology revenue
streams, Gunderman & Tawadros (2007) support the same notion. Hospitals, which typically
have high overhead costs, obstruct free-standing niche clinics from subsuming their market share
for technical component revenue streams. Assuming that technical component streams can only
be performed by a limited number of suppliers due to licensure laws, it can be stated that both
suppliers i.e. the hospital and the freestanding medical specialist fight over a source of economic
rent. Highlighting scope-of-activity conflicts between facilities, Cimasi (2008) states: “The turf
war between hospitals and physicians is the catalyst driving the increasingly volatile regulatory
environment surrounding niche providers. In attempting to protect what they perceive as their
‘‘turf,’’ hospitals have united in their battle against specialty and niche providers.”
4. Obtaining complementary input: Two of the included articles propose that medical
association lobby to acquire subsidies for complementary input that benefits doctors e.g.
subsidies to hospitals or nurse training (Gravelle, 1985; Young, 1985). This provides a cheap
source of labor for the rent-seeker who can thusly keep operational costs at a lower level.
39
4.5. Results Research Question 3 What do the studies indicate about the manner in which rent-seeking agents restrict total
production output in healthcare?
The included articles were analyzed using the theoretical framework described in chapter 2. For
the third research question, the findings are presented in table 4.5.1. followed by a description of
the findings.
Table 4.3. Total production output restrictions Study: Type of rent-seeking behavior:
2a) Scope-of-activity
monopoly
2b) Goodwill as a
barrier to entry
2c) Manipulating
licensing procedure
2d) Safety regulations
to increase cost for less
advanced competitors
1. Anderson,
Halcoussis, Johnston &
Lowenberg (2000)
x x x
2. Andrews (1986) x x x
3. Baer (1989) x
4. Chu (2008)
5. Cimasi (2008) x x x
6. Cohen & Juszczak
(1997)
x
7. Cramer, Dewulf &
Voordijk (2013)
8. de Voe & Short
(2003)
9. Dickerson &
Cambpbell-Heider
(1994)
x
10. Gravelle (1985) x x x
11. Gualda, Narchi &
de Campos (2013)
x
12. Gunderman &
Tawadros (2007)
x x
13. Kelner , Wellman,
Boon & Welsh (2013)
x x x
14. Krauss, Ratner &
Sales (1997)
x x
15. Landers & Seghal
(2004)
16. Landers, Ashwini
& Sehgal (2000)
17. Leffler (1978) x x x
18. Moynihan (2009)
19. Mullinix &
Bucholtz (2009)
x
20. Page (2004)
21. Reilly & Santerre
(2013)
22. Riemer-Hommel
(2002)
23. Schetky (2008)
24. van den Bergh &
Faure (1991)
x x x x
25. White J. (2013)
26. White W.D. (1987) x x x
27. Young (1985) x
40
Total: 14 1 10 10
2a) Scope-of-activity monopoly: Fourteen of the included articles argue that the healthcare
market consists out of a policy-designated distribution of autonomy i.e. market share through
legislation. Andrews (1987), Cohen & Juszczak (1997), Dickerson & Cambpbell-Heider (1994),
Gualda, Narchi & de Campos (2013), Mullinix & Bucholtz (2009), White (1987) and Young
(1985) investigate this with regards to the professional autonomy of nurses in competition with
other types of healthcare providers. Young (1985) also finds that professionalization of
optometry and licensure of medical laboratory personnel has led to increased prices. With
regards to professional associations in Belgium, van den Bergh & Faure (1991) assert that:
“Physicians and pharmacists enjoy a well-protected monopoly. The definition of medical
services is strongly monitored by the physicians themselves.” Gualda, Narchi & de Campos
(2013) document the weary response from the vested medical community against the
introduction of midwifery whereas three other articles describe the scope-of-activity conflicts
between nurse practitioners and physicians (Andrews, 1987; Cohen & Juszczak 1997; Mullinix
& Bucholtz, 2009). Alluding to scope-of-activity conflicts for technical component revenue
streams, Cimasi (2008) finds that: “At the heart of these battles is the technical component of
diagnostic services and procedures. Some attacks, such as the ‘‘designated imager’’ proposals,
are part of a turf war between radiologists and other specialists over technical component
revenues.”
2b) Goodwill as a barrier to entry: One article (van den Bergh & Faure, 1991) indicated that
pharmacies are sold for higher than allowed prices. Surplus prices are paid for the takeover of a
pharmacy, and the authors indicate that: “In spite of the regulation, in the literature prices are
cited of ten to twenty million Belgian francs. There thus seems to be a black market for
pharmacies, because these prices largely exceed the maximum fixed by the regulation." The new
entrant is paying the incumbent a high entry fee to become a supplier in a closed market with
established economic rents.
2c) Manipulating licensing procedure: Ten of the included studies asserted that medical
associations restrain the growth of licensed professionals to protect their own income. Gravelle
(1985) brings forth that: “…state licensing boards were manipulating the pass rate to protect the
income of existing licence holders”. Anderson, Halcoussis , Johnston & Lowenberg (2000)
indicate that licensing regulation is manipulated to reduce competition from providers of
alternative medicine. Cimasi (2008) discusses the turf conflicts between hospital and free-
standing niche providers and states that hospitals manipulate licensure regulation to limit
competition: “The Florida legislature passed a bill prohibiting the licensure of new specialty
hospitals. A hospital may not be licensed if 65% of its patients received cardiac, orthopedic, or
cancer services or if it restricts its medical and surgical services primarily to cardiac,
orthopedic, surgical, or oncology specialties. Although ambulatory care services are not
specifically covered by the moratorium, the moratorium is a significant victory for the hospital
41
industry in its battle to protect hospitals from limited-service providers.” Cimasi (2008) also
states that hospitals manipulate ‘economic credentialing’ to restrict entry: “Although the term
‘‘economic credentialing’’ does include such economic factors as the frequency of physician’s
use of the hospital and the physician’s ability to use hospitals facilities in an economically
efficient manner, it recently has begun to include such retaliatory practices as the removal from
the hospital medical staff of doctors who have a financial interest at a competing specialty
facility.” Elaborating on tactics to restrict entry into radiology diagnostic testing privileges,
Gunderman & Tawadros (2007) find that control over accreditation provides a suitable
instrument: “Some radiologists have responded to competition by promoting policies and
regulations that limit the performance and interpretation of imaging examinations by
nonradiologists. Proposals have included (..) accreditation and physician training standards”
The same finding is alluded to by Krauss, Ratner & Sales (1997): “If an industry wide specialty
credentialing or standardsetting organization gains too much power, it may at some point be
susceptible to a claim that the group in control of the system has monopoly power and is using
the power to maintain or obtain power.” Similarly, Leffler (1978) hints at the potential of
manipulating education standards to restrict supply: “Supply restrictions might be achieved by
somewhat arbitrary failure criteria for which state-exam failure rates should be a better proxy.”
Manipulation of education (periods) to restrict entry into the profession is also attested to by van
den Bergh & Faure (1991).
2d) Safety regulations to increase cost for less advanced competitors: Ten articles indicated
that incumbent suppliers erect industry standards to increase the cost of entry to the closed
market. In an attempt to obstruct less advanced competitors, Kelner, Wellman, Boon & Welsh
(2004) note the following: “Currently, the medical profession, as the dominant structural
interest, is in the prime position to impose its version of evidence on others. This requirement for
‘‘scientific’’ evidence creates a major barrier for complementary and alternative medicine
groups wishing to gain professional status.” Similar observations are made by Baer (1989) who
states: "In responding to Flexner’s negative comments on eight osteopathic schools, the
American Medical Association lengthened the courses of study in osteopathic schools to 4 years
and forced many of them to shut their doors. By 1926, only six osteopathic schools remained in
operation, and in 1940 the Massachusetts College of Osteopathy also closed." Raising
educational standards is used to deter competition from less skilled personnel as indicated by
White (1987): "But increased economic pressures on nurses are likely to be accompanied by
mounting political pressures to use professional regulation to protect existing jobs and possibly
create new ones. Already, for a variety of reasons, efforts are underway to raise educational
standards for registered nurses." Anderson, Halcoussis , Johnston & Lowenberg (2000) state
that: “Regardless of the ostensible motivation behind requiring physicians to undergo formal
continuing education, such mandatory coursework constitutes a de facto entry barrier
confronting new potential doctors. Mandatory continuing education requirements tend to
increase the price of available medical services and reduce the quantity supplied, the necessary
precondition for the creation of producer rents”. The authors also find that, because of the fact
42
that the training period in medicine is artificially extended in order to benefit established
practitioners, prospective high quality students undertake other activities (e.g. business school) as
the opportunity costs of studying medicine become too high. The authors point out that this
decreases the average quality of medicine students whilst at the same time increases the price. In
similar fashion, Gravelle (1985) finds that: “those seeking entry into the profession may have to
engage in costly activities which have little social benefit, for example passing examinations in
esoteric subjects of little relevance for the practice of their profession.” Scrutinizing the Belgium
professional associations, van den Bergh & Faure (1991) claim that: “Entry barriers can be
erected either directly through the fixing of a numerus clausus or indirectly through obligatory
apprenticeships with particularly heavy duties and lack of appropriate remuneration.” In
addition, van den Bergh & Faure (1991) mention that in Belgium, specialized training for
physicians is restricted by a ‘numerus fixus’. Criticizing the double standards of educational
requirements, Gravelle (1985) and van den Bergh & Faure (1991) both assert that whenever
regulation is tightened the older, established practitioners are exempted. These so called
‘grandfather clauses’ serve to protect existing practitioners from competition by new and
younger entrants, constituting an ‘intra-professional income transfer.’ Krauss, Ratner & Sales
(1997) note: “Grandparenting, which is the practice of subjecting new participants in a practice
to the new or higher certification standard but excluding the current participants form being
held to the new or higher standard, may be viewed as anticompetitive conduct, especially by a
credential or standard-setting system that wields monopoly power.”
Other: Seven additional findings were made during the review of the literature which were not
explicitly included in the theoretical framework, but do provide more insight on rent-seeking
behavior in healthcare. They are the following:
1. Restricting the availability of substitute services: Five of the articles found that income
transfers are obtained by decreasing the quantity and/or increasing the price of substitute
services. Anderson, Halcoussis , Johnston & Lowenberg (2000) and Baer (1989) promulgate that
the allopathic school of medicine has sponsored legislation to limit competition from other forms
of healing and from this has derived a self-delegated monopoly on the discipline of healing. Baer
(1989) states that healthcare has been delegated to the domain of biomedicine as a result of the
1910 Flexner report which was sponsored by corporate interest and favored allopathic medicine.
He claims that this purported superiority of biomedicine (as opposed to e.g. chiropractic therapy)
and its concomitant disease model (as opposed to e.g. social origins of disease) is delegated
rather than absolute. Gravelle (1985) and Young (1985) both3 point out that the medical
community of interest restricts the availability of substitute services. Futhermore, Kelner ,
Wellman, Boon & Welsh (2004) find that: “The argument that only physicians have the
appropriate training to properly diagnose a health problem is another protective mechanism.”
3 Gravelle (1985) and Young (1985) refer to Feldstein (1977) as the original author of numerous statements. Hence,
many observations between the two articles are similar. Feldstein P. J. Health Associations and the Demand for
Legislation, Chap. 2. Bollinger, Cambridge, MA, 1977. The original source is not included in this study.
43
2. Control over accreditation/credentialing to control total industry supply: Four of the
included articles referred to another common method of controlling output, namely that of
accreditation agencies. In a legal analysis on the implications of anti-trust regulation on
professional psychologist associations, Krauss, Ratner & Sales (1997) warn that control over
credentialing/accreditation agencies allows for control of the level of output in an industry and
state: “The power of a credentialing system to control prices and output will more ordinarily be
conferred indirectly from the ability to restrict the number of providers of a service and to
control the nature of the service provided.”Anderson, Halcoussis , Johnston & Lowenberg
(2000) note: “In the late 19th and early 20th century the American Medical Association set out
to close down proprietary, for-profit medical schools, many of which offered training in
alternative medicine, with the express purpose of restricting entry into the profession.” The
exact same observation is made by Gravelle (1985). With regards to niche providers in
competition with hospitals for technical component revenue streams, Cimasi (2008)
demonstrates that ‘economic credentialing’ is used to deny hospital privileges to physicians that
own competing niche clinics.
3. Restricting geographic mobility: Three of the included articles make mention of restricting
competition from out-of-state through domestic licensure. Gravelle (1985) and White (1987)
conclude that licensure at the state level inhibits geographic mobility and thus deters competition
from out-of-state. White (1987) summarizes the issue: "In addition to affecting the division of
labor, mandatory licensure laws may create barriers to geographic mobility and raise the cost of
attracting out-of-state personnel, who now must become licensed in a state in order to practice
their occupation at all." Adding to this, Gravelle (1985) denotes efforts by the American
Medical Association to make citizenship a requirement for the practice of medicine as another
form of geographic protectionism. In the case of Belgium, van den Bergh & Faure (1991) make
a similar statement with regards to the free movement of medical professionals within the
European Union.
4. Manipulating proprietary rights: One of the included articles (Chu, 2008 ) considered the
manipulating of patent legislation by the pharmaceutical industry as a method to restrict
competition. Chu finds that “given the nature of the industry, it is easy to understand that it is in
the drug companies’ best interest to have access to the policy-makers, who can easily return
favors at low political costs. For a blockbuster (a drug that has sales of over a billion dollars a
year), an extension of the patent’s effective lifetime for a few years could be extremely profitable
given the usually negligible marginal cost of production for drugs.”
5. Forming cartels and imposing membership: Three of the included articles indicated that
networks of allied professional associations function as cartels. Page (2004) notes that medical
associations seek increased market share through broad networks in order to exert more control
over total production output. Moreover, the author points out that the physician organizations in
the United States seek exemption from anti-trust regulations in order to legally engage in cartel
practices. Gunderman & Tawadros (2007) denote professional organizations as cartels and
44
describe the radiology profession as follows: “A cynical observer might foresee 3 components in
the lobbying activity of any field such as radiology: (1) strict sanctions against price cutting, (2)
tight regulation of entry into the profession, and (3) a tacit agreement by members of the
profession to cover up mistakes and prevent feedback about them from reaching the public.”
Gravelle (1985) provides the following three strategic manifestations by which the American
Medical Association enforces collusion amongst its members in order to sustain a cartel:
“-First it can control the supply of interns (a source of cheap labour) to a hospital by the threat
of revocation of its status as an institution which can train licensed doctors. This enables the
A.M.A. to ensure that hospitals are staffed only by doctors who are members of their local
medical association. Hence expulsion of a doctor from the local association will entail loss of his
ability to treat his patients in hospital.
-Second, as noted above, only members of local medical associations may be allowed to acquire
advanced qualifications.
-Third, non-members of a local association will not be assisted in malpractice cases and will find
that it is difficult to find expert medical witnesses to testify for them. Membership of the local
medical association is thus of considerable benefit to the individual practitioner and enables the
associations to enforce the rules which seek to restrain competition amongst members of the
profession, particularly restrictions on advertising.”
6. Prohibiting intra-professional competition
Delving deeper into the mechanics of intra-professional competition restrictions, van den Bergh
& Faure (1991) find that ‘incompatibility regulations’ (regulations that e.g. prohibits a single
individual being a physician and pharmacist simultaneously) and restrictions on cooperation also
makes it more difficult for alternative forms of organization to develop since such restrictions
limit the range for experimentation with the division of labor. The purpose of restricting
alternative divisions of labor is to prevent one cartel member of gaining a competitive advantage
over other members of the cartel. Prohibitions on advertising amongst professional guild
members exist to obstruct intra-professional competition (Gravelle, 1985; van den Bergh &
Faure, 1991; Young, 1985). van den Bergh & Faure (1991) state: “Restrictions on cooperation
and partnerships complement limitations on advertising by making it more difficult for one
professional to gain a competitive advantage over another. Incompatibilities prohibit the
combination of adjacent professions. Changes in a profession often occur as a consequence of a
change in the “division of labor” or through diversification. The prohibition on mentioning
specialties, together with a strict regime of incompatibilities, thus hinder the development of
alternative forms of business organization. Cooperation with other professions may yield
important efficiencies that are now limited or even excluded by professional ethics.”
7. Controlling the introduction of new technical facilities (‘certificate of need’ laws)
One of the included articles (Cimasi, 2008) stressed that niche freestanding physician-owned
clinics that compete for technical component revenues with hospitals are restricted in their
production output through the manipulation of reimbursement legislation (e.g. ‘from now on
45
only ‘whole hospitals’ receive reimbursement to perform radiology’). In addition to this, Cimasi
(2008) finds that regulation that obstructs ‘duplication’ of technical component services
(‘certificate of need’ laws) has the real purpose of controlling market entry of new facilities and
shields existing providers from competition. Cimasi (2008) makes the claim that “One of the
primary attacks on specialty and niche providers on a state level is through the use of certificate
of need (CON) laws” followed by: “A stringent CON regulation can effectively prevent or limit
specialty and niche providers from entering a state, thereby protecting general hospitals from
competition.”
46
4.6. Results Research Question 4 What do the studies indicate about the manner by which suppliers induce the government to
introduce production output restrictions on the industry?
The included articles were analyzed using the theoretical framework described in chapter 2. For
the fourth research question, the findings are presented in table 4.6.1. followed by a description
of the findings.
47
Table 4.4. Inducing the government to impose rent-seeking policies Study: Rent-seeking behavior:
3a) campaign
contributions
3b)
bribes
3c) conflict-of-
interest
constructions
3d)
Regulatory
capture
3e)
Revolving
door
3f)
Pressure
groups
3g)
political
power
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
x
2. Andrews
(1986)
3. Baer (1989) x
4. Chu (2008) x
5. Cimasi
(2008)
x x
6. Cohen &
Juszczak
(1997)
7. Cramer,
Dewulf &
Voordijk
(2013)
8. de Voe &
Short (2003)
x
9. Dickerson &
Cambpbell-
Heider (1994)
x
10. Gravelle
(1985)
x x
11. Gualda,
Narchi & de
Campos (2013)
x x
12. Gunderman
& Tawadros
(2007)
x
13. Kelner ,
Wellman,
Boon & Welsh
(2013)
x x
14. Krauss,
Ratner & Sales
(1997)
x
15. Landers &
Seghal (2004)
x x
16. Landers,
Ashwini &
Sehgal (2000)
x x
17. Leffler
(1978)
x
18. Moynihan
(2009)
x
19. Mullinix &
Bucholtz
(2009)
x
20. Page
(2004)
x
21. Reilly &
Santerre
(2013)
48
22. Riemer-
Hommel
(2002)
23. Schetky
(2008)
x
24. van den
Bergh & Faure
(1991)
x x
25. White J.
(2013)
x x
26. White
W.D. (1987)
x x x
27. Young
(1985)
Total: 7 0 2 4 0 5 13
3a) Campaign contributions: Seven of the included studies made mention of the fact that
medical associations supply campaign contributions to politicians as part of lobbying
expenditures. Five of the included articles indicated that resources were spent on lobbying
legislators (Andrews 1986; Baer, 1989; Chu, 2008; Cohen & Juszczak, 1997, Landers & Seghal,
2004) and two of the included articles mentioned that the medical community of interest makes
use of professional lobbyist (Landers, Ashwini & Sehgal, 2000; Kelner , Wellman, Boon &
Welsh, 2004).
3b) Bribes: None of the included studies made any mention of bribes.
3c) Conflict-of-interest constructions: Two of the included studies mentioned conflict of
interest constructions between prescribing physicians and the pharmaceutical industry
(Moynihan, 2009; Schetky, 2008). The physician as a legally mandated gatekeeper essentially
grants the political award (the subscription) whilst the pharmaceutical producer shares the
obtained rent (reimbursement for the prescription) with the physician through e.g. offering a trip
to a medical conference in the Bahamas).
3d) Regulatory capture: Four of the included articles mention that the medical industry engages
in regulatory capture with regards to control over accreditation and credentialing agencies (van
den Bergh & Faure, 1991; Cimasi, 2008, Krauss, Ratner & Sales 1997; White, 1987).
Credentialing allows for registration of suppliers and thus allows for total industry control.
3e) Revolving door: None of the included studies made mention of the revolving door between
leading executives of regulatory agencies and the medical industry.
3f) Pressure groups: Five of the included articles indicated that the medical community of
interest influences the government through pressure groups. Only two articles specified what this
entails, namely: organizing seminars, distribute pamphlets, maintain close relationships with
civil servants, raise money to launch campaign against reform and at times promulgate a ‘no
compromise pledge’ (de Voe & Short, 2003; Gualda, Narchi & de Campos, 2013). Gualda,
Narchi & de Campos (2013) mentioned that the Health and Labor Ministries were under direct
pressure from medical and nursing organizations to impose restrictions on the practice of
49
midwifery. One of the included articles indicated that the medical community of interest engages
in advocacy to persuade the government to exempt medical cartels from anti-trust regulation
(Page, 2004). Gravelle states that: “Professional associations are the devices through which
individual members seek to influence legislators and regulators.”
3g) Political power: Thirteen articles made mention of political power, though none of the
articles further specified or defined this term. One of the included studies highlighted the
Belgium scenario where the medical representatives are thoroughly integrated with the political
machine through legislation. In their article, van den Bergh & Faure & Faure (1991) state: “As
far as the extent of the monopoly rights is concerned, the Minister cannot act against the
dominant opinion of the highest representatives of the medical profession (the Royal Academies
of Medicine and the university faculties). According to the literal text of the law, in case of
negative advice the Minister must withdraw his proposition or formulate a new one.”
Other: One additional method of inducing the government to impose rent-seeking policies was
encountered, namely the following:
1. Manipulating studies: Two of the included articles mentioned the manipulation of studies.
Young (1985) states: “Medicine sustains control over other health occupations by pressuring
legislatures, regulatory agencies, and public study commissions to minimize competition between
medicine and allied health occupations.” In similar fashion, Cimasi (2008) reports about the
hospital cartel: “Other studies have been conducted by the government, sometimes at the
prompting and lobbying of general hospitals and groups such as the American Hospital
Association. Thus, even studies conducted by the government that seem to be impartial may be
influenced through the lobbying by general hospital groups in conjunction with the government’s
own financial interests and motives.”
50
4.7. Results Research Question 5 What anecdotal evidence does there exist on the practice of rent-seeking within the context of
Curaҫao?
The participatory study conducted at the social insurance bank (S.V.B.) in Curaҫao provided the
opportunity for the collection of anecdotal evidence. It should be noted however, that as rent-
seeking is a covert activity, the exact interpretations might be subject to different views. For
example: a plight for higher educational standards can be argued to increase the quality of care
(though this is always accompanied by an industry controlled credentialing/registration system
and a grandfather clause for incumbent suppliers) and a plight for economic credentialing can be
argued to limit the healthcare expenditures of the state by limiting new suppliers to gain entry in
a fee-for-service system (though this is a consequence of the inability of the insurers to engage in
selective contracting). Excerpts of the documents are enclosed in the appendix. Table 4.5., 4.6.
and 4.7. provide an overview of the results corresponding to research question 2, 3 and 4
respectively. The social insurance bank acknowledges that the authenticity of the evidence
collected in this study is instrumental to the understanding of the healthcare market in Curaҫao.
The documents, some of which are in physical possession of the social insurance bank, contain
no legal bearing of significance. One document concerning goodwill fees which indicated that
medical specialist make explicit use of the term ‘entry fee’ when stipulating admittance to a
partnership was deemed confidential and could not be included for the purpose of this study.
51
Throughout the participatory study, documents were gathered in an unstructured manner from a
variety of sources. Many of them are publically available (parliamentary discussions, media
excerpts and reports) though some of them were obtained through participation at the social
insurance bank (letters, notes of meetings). The findings on income transfers are captured by
rent-seekers in the Curaҫao healthcare market according to the documents are presented in table
4.5. Next, the findings are elaborated on by means of a descriptive text which brings for the
argumentation and further specifies the content of the documents. Relevant citations from
amongst the 27 included literature studies accompany the document excerpts where applicable.
Table 4.5. Capturing income transfers in Curaҫao
Document: Type of rent-seeking behavior:
1a) pressuring
for income
transfers
1b) pressuring for
eligibility for
reimbursement
1c) pressuring for subsidies
for public health
interventions
1d) Pressuring
for tariffs
1e) obstructing
selective
contracting
1. Letters from
two hospitals
x x x
2. Letter from
gynecologist
association
x x
3. Turf conflict
midwifery-
gynecologist
x
4. Parliamentary
discussion#1
5. A plight for
stricter regulation
x
6. Parliamentary
discussion #2
x x
7. Law that
restricts entry
x
8. Arbitrary
entrance criteria
x
9. Letter from
physician
association
x
10. Control over
accreditation
11. Demanding
economic
credentialing
x
12. Denying
hospital
privileges
x
13. Price-fixing
amongst
pharmaceutical
importers
x x
14. Prohibiting
expedient
division of labor
x
15 .Certificate of
need laws
x
16. Goodwill as
an entry barrier
17. Economic
and political
x
52
integration by
pharmaceutical
wholesalers
18. Request for
legal advice for
physician
association
x
19. Legal
response to
physician
association
x
20. Control over
market entry
through
accreditation
x
21. Creating
demand for the
treatment of
broad social
conditions
x x x
Total: 13 2 2 1 3
Several items corresponding to the theory were encountered. They are described below
according to the format of the theoretical framework as described in chapter 2 of this thesis.
1a) Pressuring for income transfers: Of the included documents, 13 indicated how income
transfers are captured in the local context. The medical community of interest in Curaҫao has
tight restrictions on entry through ‘certificate of need’ (#15) laws and control over accreditation
(and thus registration of eligible suppliers) (#20). Committees are set up by incumbent suppliers
to ‘test the need’ for new entrants. These committees are denounced as operating arbitrarily.
Furthermore, medical specialists linked to the main hospital can deny hospital privileges to
competing specialist (#1, #12). Two newspaper excerpts state that incumbent medical specialist
have veto powers on the granting of hospital privileges to prospective new entrants whilst one
letter the hospital mentions that admittance to hospital facilities is arbitrarily defined. Market
share is delegated by policy (#6); eye physicians in Curaҫao for example, retain the exclusive
rights to obtain fee-for-service remuneration for routine medical services such as optometry.
Gynecologist increase the demand for their services by subsuming childbirth at the expense of
midwifery (#3). The physician association aims to prohibit expedient division of labor in an
effort to prohibit intra-professional competition (#14, #18, #19). In correspondence between the
Curaҫao and the Dutch physician association, plans are contrived to prohibit individual
physicians of employing paraprofessionals c.q. medical graduates to increase productivity and
thus accept larger capitation contracts. By using such policies that handicap individual suppliers
to gain a competitive edge, economic rent is created. An autism foundation spreads awareness on
autism in media disclosures and highlights the need for government financing to help children
with autism (#21).
1b) Pressuring for eligibility for reimbursement: Two letters from two separate hospitals in
Curaҫao demonstrate that the medical community of interest in Curaҫao defends their ‘right’ to
53
serve low income groups which are financed by tax revenues (#1). The letter indicates primarily
that the institutions in question appraise ‘access to care’ programs primarily as a source of
income and that the hospitals are willing ‘to go the extreme’ to ‘preserve their right to exist’. The
letters indicate that the hospitals are upset by the possibility that their services and facilities may
no longer be eligible for remuneration within the ‘access to care for low income groups’
program. An autism foundation spreads awareness on autism in media disclosures and highlights
the need for reimbursement by the social insurance bank to help children with autism (#21).
1c) Pressuring for subsidies for public health interventions: The letters from the two
hospitals frame the issue as a ‘universal access to care for low income groups’ principle, though
one of the hospitals callously demands that in case the revenue stream is diverted, it should be
compensated through a tariff increase in other revenue streams (#1). Universal access to care is
frequently mentioned as a core pillar for maintaining public health. An autism foundation
spreads awareness on autism in media disclosures and highlights the need for government
financing to help children with autism and lays a claim on the fund for long term and chronic
care ‘Algemene Verzekering Bijzondere Ziektekosten’ (General Insurance Exceptional Medical
Expenditures)
1d) Pressuring for tariffs: Informal price-fixing and formal tariffs are common, such as in the
case of the pharmaceutical importers, who agree to maintain a uniform profit markup (#13).
1e) Obstructing selective contracting: A letter from the gynecologist association to the social
insurance bank indicates that the vested gynecologists are hostile against the (partial)
employment of gynecologists that perform marginal duties (#2). The gynecologist are upset
about the fact that social insurance bank delegates a portion of the contracts to non-full-fledged
professional gynecologist to perform non-invasive procedures. A plight for protection of the title
‘family physician’ indicates that the physician association in Curaҫao aims to restrict market
entry by imposing a strict definition between the terms ‘family physician’ and ‘medical graduate’
(#5, #9). The pharmaceutical importers in Curaҫao ensure that their concession rights cannot be
bypassed, and react decisively to attempts at parallel import (#17).
54
Throughout the participatory study, documents were gathered in an unstructured manner from a
variety of sources. Many of them are publically available (parliamentary discussions, media
excerpts and reports) though some of them were obtained through participation at the social
insurance bank (letters, notes of meetings). The findings on how total production restrictions are
put in effect in the Curaҫao healthcare market according to the documents are presented in table
4.7.2. Next, the findings are elaborated on by means of a descriptive text which brings for the
argumentation and further specifies the content of the documents. Relevant citations from
amongst the 27 included literature studies accompany the document excerpts where applicable.
Table 4.6. Total production output restrictions in Curaҫao
Document: Type of rent-seeking behavior:
2a) Scope-of-activity
monopoly
2b) Goodwill as a
barrier to entry
2c) Manipulating
licensing procedure
2d) Safety regulations
to increase cost for less
advanced competitors
1. Letters from two
hospitals x
2. Letter from
gynecologist
association
3. Turf conflict
midwifery-
gynecologist
x
4. Parliamentary
discussion#1
x
5. A plight for stricter
regulation
x x x
6. Parliamentary
discussion #2
7. Law that restricts
entry
8. Arbitrary entrance
criteria
x
9. Letter from
physician association
x x
10. Control over
accreditation
x x x
11. Demanding
economic credentialing
x
12. Denying hospital
privileges
13. Price-fixing
amongst
pharmaceutical
importers
14. Prohibiting
expedient division of
labor
15 .Certificate of need
laws
x
16. Goodwill as an
entry barrier
x
17. Economic and
political integration by
pharmaceutical
wholesalers
18. Request for legal x x
55
advice for physician
association
19. Legal response to
physician association
x x
20. Control over
market entry through
accreditation
X x
21. Creating demand
for the treatment of
broad social conditions
Total: 7 1 7 6
Several items corresponding to the theory were encountered. They are described below
according to the format of the theoretical framework as described in chapter 2 of this thesis.
2a) Scope-of-activity monopoly: Seven of the included documents demonstrate the implications
of legally defined scope-of-activity monopolies. One is a report that indicates the turf conflicts
between midwives and gynecologist with regards to who gets the remuneration for childbirth
(#3). A parliamentary document highlights the legally delegated monopolies of eye-physicians
vis-à-vis optometrists (#6). A plight from the physician association pleads for a legally
delineated market share through obtaining exclusive control over the title ‘family physician’
(‘Huisarts’) (#5, #9). This is done through control over accreditation and thus registration of this
title (#10, #18, #19, #20). In a legal correspondence between the physician association of
Curaҫao and that of the Netherlands, plans are discussed to use the registration of the ‘family
physician’ title as backdoor instrument to create a ‘closed’ system (#18). Corresponding with
rent-seeking theory, a ‘grandfather clause’ provides exemption for vested physicians whereas
new entrants are subject to tightened regulation (#18, #19). Similar to the observations of van
den Bergh & Faure (1991), an individual who has the credentials to operate as both a physician
and a pharmacists at the same time, is not allowed to do this by law.4
2b) Goodwill as a barrier to entry: One advisory paper by Coopers & Lybrand (1993)
indicated that goodwill fees amongst medical specialist might be a guise for an entry fee (#16).
Contracts amongst medical specialist in Curaҫao also specifically make mention of the word
‘entry’ and not ‘succession’ when discussing goodwill fees.
2c) Manipulating licensing procedure: Seven of the included documents indicated the
manipulation of licensing procedures. One of the letters from the hospitals makes mention of
arbitrary defined admittance to hospital privileges (#1), something also pointed out in media
disclosures (#12). A plight for protection of the family physician title includes the intention to
deter only new entrants (#9). The commission that administers ‘certificate of need’ laws is
defined as operating arbitrarily (#8, #15). Association control over accreditation and thus
4 Landsverordening op de geneesmiddelenvoorziening, Artikel 34:
De uitoefening van de artsenijbereidkunde is aan geneeskundigen die tevens de hoedanigheid van apotheker bezien, verboden zolang zij de geneeskundige praktijk uitoefenen, behoudens het bepaalde in artikel 35.
56
registration with sickness funds facilitates the manipulation of the licensing procedure (#10,
#20).
2d) Safety regulations to increase cost for less advanced competitors: The family physician
association in Curaҫao employs credentialing and mandatory post-graduate education to raise the
cost of market entry for prospective entrants and to protect incumbent suppliers (#18, #19, #20).
Throughout the participatory study, documents were gathered in an unstructured manner from a
variety of sources. Many of them are publically available (parliamentary discussions, media
excerpts and reports) though some of them were obtained through participation at the social
insurance bank (letters, notes of meetings). The findings on how governments are induced to
impose rent-seeking policies according to the documents are presented in table 4.7.3. Next, the
findings are elaborated on by means of a descriptive text which brings for the argumentation and
further specifies the content of the documents. Relevant citations from amongst the 27 included
literature studies accompany the document excerpts where applicable.
Table 4.7. Inducing the government to impose rent-seeking policies in Curaҫao
Document: Type of rent-seeking behavior:
3a)
campaign
contributions
3b)
bribes
3c) conflict-of-
interest
constructions
3d)
Regulatory
capture
3e) Revolving
door
3f)
Pressure
groups
3g)
political
power
1. Letters from
two hospitals
2. Letter from
gynecologist
association
x
3. Turf conflict
midwifery-
gynecologist
4.
Parliamentary
discussion#1
x
5. A plight for
stricter
regulation
6.
Parliamentary
discussion #2
x
7. Law that
restricts entry x
8. Arbitrary
entrance
criteria
x
9. Letter from
physician
association
x
10. Control
over
accreditation
x
11.
Demanding
economic
credentialing
x
12. Denying
hospital
privileges
x x
57
13. Price-
fixing amongst
pharmaceutical
importers
14. Prohibiting
expedient
division of
labor
x
15 .Certificate
of need laws x
16. Goodwill
as an entry
barrier
17. Economic
and political
integration by
pharmaceutical
wholesalers
x x x
18. Request
for legal
advice for
physician
association
19. Legal
response to
physician
association
x x
20. Control
over market
entry through
accreditation
x
21. Creating
demand for the
treatment of
broad social
conditions
x x
Total: 1 0 1 3 0 7 7
Several items corresponding to the theory were encountered. They are described below
according to the format of the theoretical framework as described in chapter 2 of this thesis.
3a) Campaign contributions: The pharmaceutical importers are noted to integrate with politics
in Curaҫao to sustain current laws. According to one source, this is done through campaign
contributions to political parties and conflict of interest constructions with political figures.
Previous attempts to bypass wholesales (parallel import) have been obstructed and have led to
“protest, threats and even repercussions” (#17).
3b) Bribes: The included documents did not include anything on bribery.
3c) Conflict-of-interest constructions: The pharmaceutical importers integrate with politics in
Curaҫao through conflict-of-interest constructions in order to sustain laws that prohibit the
bypassing of their enterprise (#17). The committees that grant or deny hospital privileges are
known to have conflicts of interest (#12). Certain incumbent suppliers have dual functions as
medical specialist and chairman of admittance committees.
58
3d) Regulatory capture: The documents concerning accreditation indicate that the professional
medical associations aim to be in charge of accreditation and thus registration of new entrants
(#10). This is done under the pretext of safeguarding quality. The committees that grant or deny
hospital privileges demonstrate the control over regulation by incumbent suppliers (#1, #12).
3e) Revolving door: The included documents did not include anything on the revolving door.
3f) Pressure groups: In general, the medical community of interest applies pressure tactics e.g.
in the form of controlling supply for emergency uptake and threatening to revoke this (#2). For
example: the gynecologists threaten that, if their demands are not met, they will no longer
perform off-hour shifts. Niche foundations try to increase demand for the medical treatment of
broad social conditions through media disclosures (#21).
3g) Political power: Many protectionist measures for the medical community in Curaҫao are
granted by law, for example the medical tariff law and various incompatibility laws (e.g. free
standing clinics cannot perform laboratory test, but must leave these to the holder of the
laboratory license5:
Concluding remark: The documents obtained throughout the participatory study, when
mirrored next to relevant citations from the included academic publications, indicate a
considerable amount of resemblance between public choice theory and real-life practice. The
participatory study did not produce new insights, but confirmed many of the findings from the
explorative literature review on rent-seeking behavior in healthcare policy.
5 Landsbesluit regeling medewerking aan de sociale verzekeringen 1960, Artikel 7a:
1. De onderzoeken, bedoeld in de bijlage van het Medisch Tarief Sociale Verzekeringen (P.B. 1959, no. 194) onder
Tarief D - Diagnostisch Onderzoek - sub Inleiding, worden voor zover die onderzoeken zijn opgenomen in de
Tarieven Landslaboratoria (P.B. 1965, no. 87) op Curaçao en Aruba uitsluitend verricht door de landslaboratoria.
59
5. Conclusion, Discussion and
Recommendations
5.1. Introduction The analyzed results used to answer the research questions are consulted to provide an answer to
the problem statement of this research. Next, the manner that this study is conducted is
scrutinized in the discussion section to indentify short fallings. Finally, the chapter closes with
scientific as well as policy recommendations.
5.2. Conclusion In this section, the sequence of research questions is used to submit a conclusive answer to the
problem statement.
1) What studies have been conducted that explore rent-seeking behavior in healthcare?
The scope of inclusion for the explorative literature review allowed for a number of academic
publications to be included for analysis. Two separate databases have been consulted: Science
Direct (Elsevier) and EBSCO host. Using a pre-defined search term protocol the databases were
explored. Based on a preliminary screening of titles, followed by a screening of the abstracts and
the application of an inclusion form, 26 articles qualified to be included in the study and to
contribute to the body of knowledge on rent-seeking in healthcare. The articles provided deep
insight on the topic of rent-seeking in healthcare, especially the publications by Gravelle (1985)
and van den Bergh & Faure (1991).
2) What do the findings of these studies indicate about healthcare policy as a potential tool for
rent-seeking agents to capture income transfers?
Income transfers in healthcare are created by means of monopoly rents, put into effect through
market share by legislation (licensure) which allows for the monopolization of supply by
established providers. Monopoly entails the absence of competition and can be achieved through
collusion between established suppliers.
In addition, the rent-seeking agent in healthcare aims to capture income transfers through
securing integration with reimbursement systems The most obvious example is that of state-
financed reimbursement programs for low income groups . Adding to this, rent-seekers ensure
that such revenue streams are not diverted to substitute services c.q. alternative &
complementary medicine.
Many commodities and services in the healthcare community seek to integrate with public health
subsidy streams, especially those that guarantee universal access to care to low income groups. In
addition to this, the rent-seeking agent in healthcare expands the scope of public health
interventions to include broad social conditions such as aging, alcoholism and youth delinquency
to increase the demand for services and commodities of the medical suppliers involved in the
spreading of the awareness of the social condition.
60
Moreover, income transfers are captured by means of price-fixing and tarrifs, which are two
sides of the same coin. Fixed prices protect incumbent suppliers from having to confront
effective competition and allows them to maintain monopoly rents. Another step related to price-
fixing undertaken by rent-seeking agents in healthcare is to contact other established providers
and form cartels that enforce price-fixing agreements. This is to prevent price wars and to
prevent one cartel member of gaining a competitive advantage over the other members. A
prohibition on (price-) advertising, a prohibition on diverting from minimum prices and at often
times legally enforced tariffs, function to protect rent-seekers from intra-professional
competition. In the absence of legally binding tariffs, professional medical associations enforce a
prohibition on price-cutting through self-regulation which presents itself to outsiders as
‘professional ethics’. Absence of competition creates economic rent which is claimed by the
suppliers. A redistribution of wealth is thus taking place.
With regards to selective contracting, the rent-seekers in healthcare aim to restrict the bargaining
power of third-party payers (e.g. sickness funds) by enforcing a prohibition on selective
contracting. This handicaps the sickness fund in its ability to engage in expedient health purchase
practices (e.g. by not allowing the sickness fund to make more use of periphery workers that
exclusively perform standardized non-invasive procedures). A prohibition on selective
contracting binds sickness funds to collective agreements with the suppliers and denies the
sickness fund the possibility to direct their insured population to preferred providers (e.g.
discount deals). The prohibition on selective contracting allows suppliers to independently
orchestrate demand and corresponding treatment trajectories for their services and commodities
(supplier-induced demand).
3) What do the studies indicate about the manner in which rent-seeking agents restrict total
production output in healthcare?
Output restrictions in healthcare are put into effect through the enactment of scope-of-practice
monopolies. The incumbent suppliers set out to restrict external competition (new entrants and
substitute services) as well as prohibiting internal competition. External and internal competition
is further restricted by the rent-seekers in healthcare through policy-designated distribution of
autonomy (licensure) which limits the role of cheaper alternatives. Another observation is that
scope-of-practice legislation serves to carve out the market along the contours of pre-existing
market sharing agreements. It protects incumbent providers from external competition (e.g.
limiting the autonomy of nurse practitioners in order to benefit medical specialist). Furthermore,
scope-of-practice legislation limits the range of experimentation with the division of labor and
therefore protects cartel members from internal competition. From a cartel perspective, this
serves the function of ensuring that one cartel member does not gain a competitive advantage
over the other members e.g by making extensive use of work delegated to paraprofessionals and
thereby increasing production capacity at the expense of other medical specialist who do not
employ paraprofessionals. The same holds true for legislation or professional ‘self-regulation’
that prohibits the existence of adjacent functions and/or titles for providers, the so called
‘incompatibility regulations’. A single provider being registered both as a physician and a
pharmacist would gain a competitive advantage over other members of the physician association,
which is detrimental to the sustainability of a cartel.
61
With regard to goodwill fees, entrances to closed markets are known to encompass high entry
fees; goodwill fees amongst medical specialist in the Netherlands and black market prices for
pharmacies in Belgium indicate that established and operational rent-seeking constructions are
highly esteemed economic assets amongst risk-neutral entrepreneurs.6
Rent-seeking agents in healthcare restrict the growth of new licensed professionals through
manipulation of the licensing procedure. ‘Certificate of need’ laws and ‘economic credentialing’
are used to arbitrarily determine market entry e.g. a hospital that supports such measures in order
to protect against competition from freestanding niche competitors. Out-of-state competition is
often restricted through state licensure legislation. Similarly, pharmaceutical patent legislation is
manipulated to restrict competition. Professional medical associations aim to hold control over
entry to the occupation by assuming control over accreditation and registration of suppliers. This
allows the suppliers to use industry standards to dictate the nature of the services and
commodities delivered. It equally allows for control on the total quantity available and thus
indirect control over price.
Intra-professionals income transfers are obtained when competition is restricted through
tightened safety regulation that raises operational cost for less advanced suppliers. Restrictions
into the profession are put in place by incumbent suppliers through imposing quantitative
restrictions on entry to education programs (numerus fixus) and by extending the education
periods with long traineeships. A tightened regulation for educational requirements typically
grants incumbent suppliers a general pardon and relieves them from the newly conceived cost-
imposing educational requirements which are imposed on the new and the recent entrants
(grandfather clause). Medical history indicates that the American Medical Association with the
support of the biomedicine industry used the ‘prevailing standards of science’ principle to reduce
economic competition from alternative forms of healing7. Medicine schools that could not invest
in biomedicine laboratories were closed down which lead to a reduced supply of substitute
services.
4) What do the studies indicate about the manner by which suppliers induce the government to
introduce production output restrictions on the industry?
Rent-seeking agents integrate with the government and policy makers in order to contrive or
sustain regulation that creates economic rent for the concentrated provider groups. Campaign
contributions to legislators are an integral part of lobbying expenditures by the medical
community of interest. In addition to this, conflict-of-interest constructions between the
pharmaceutical industry and physicians are used to promote the use of biomedicine products and
to trigger corresponding remuneration streams. Moreover, medical suppliers often hold control
over accreditation and registration agencies (regulatory capture). Pressure tactics are also
common in the form of advocacy, activism and relationships with civil servants. The
manipulation of public study commissions serves to endorse economically rent-seeking policies
6 In the frequently highlighted example of public choice literature, taxi driver licenses in closed market systems are
known to be subject to underhand sales at exorbitant prices (Buchanon & Tullock, 1962).
7 Flexner report. 1910. Carnegie foundation.
62
in the political discourse. Lastly, the medical community of interest is often legally integrated
with the decision making process through authoritative medical institutions and in this manner
holds de facto political power under many circumstances.
5) What anecdotal evidence does there exist on the practice of rent-seeking within the context
of Curaҫao?
Attempts to secure public funds, combined with repeated pleas for tightened restrictions on
market entry, indicate that healthcare suppliers in Curaҫao capture income transfers. Moreover,
they engage in price-fixing which is condoned, if not enforced by the government. The suppliers
aim to limit bypassing of their services and obstruct selective contracting. Market share is
delegated by policy, all be it in the form of collective (remuneration) agreements between
provider associations and sickness funds in private law. Goodwill fees are used a de facto entry
fee to gain access to the established remuneration streams of free-standing medical specialist
partnerships in Curaҫao. Licensing and privilege rights to hospitals facilities is handled by
incumbent-supplier-controlled committees that judge new entrants arbitrarily. The physician
association aims to reduce competition from new entrants by imposing stricter education
requirements, constituting an additional market entry delay of multiple years upon graduating
medical school. The incumbent physicians will be pardoned of this new regulation and are to be
granted the most up-to-date title, constituting a ‘grandfather clause’. Restrictions on intra-
professional competition are also imposed through ‘incompatibility regulations’, which aims to
prohibit one professional to hire multiple paraprofessionals to increase productivity.
Campaign contributions and conflict-of-interest constructions sustain a monopoly on import by
the pharmaceutical importers in Curaҫao. The physician association is in control over
accreditation and registration of admitted suppliers, constituting a case of regulatory capture.
Pressure tactics are used in addition to appealing to codified law (e.g. using the medical tariffs
law to enforce price-fixing amongst colluding suppliers).
63
5.3. Discussion The section examines the solidity of the theory and method used throughout this thesis in an
effort to probe for weaknesses. By doing so, the work is subject to a higher degree of scrutiny,
which in turn strengthens the level of objectivity of this study.
5.3.1. Theoretical framework In retrospect, the theoretical framework falls short on one important concept which was unknown
to the researcher prior to the explorative literature review; the prohibition on intra-professional
competition. The literature consulted when constructing the theoretical framework exclusively
exemplified rent-seeking as efforts to restrict market entry (e.g. taxi licensure is frequently used
as an example by public choice economist Buchanon & Tullock). Extending this point, the
theoretical model included ‘pressuring for tariffs’ as a stand-alone concept which according to
Zhou (1995) is meant to prevent price wars. In retrospect however, tariffs is just a mere segment
of the larger picture, namely a prohibition on intra-professional competition which manifests
itself in more ways than merely a prohibition on price-cutting. In similar fashion, the assumption
that ‘selective contracting protects established suppliers by reducing the bargaining power of
third party payers (insurers) proved to be correct, but can in retrospect also be labeled as falling
under the common denominator ‘prohibition on intra-professional competition’ since reduced
bargaining power of the consumers (c.q. insures) serves to alleviate suppliers from internal
competition. Moreover, the theoretical framework interpreted the ‘scope-of-practice monopolies’
issue exclusively from the paradigm of using licensure to limit competition from cheaper
laborers (e.g. obstetricians using licensure to restrict the autonomy of midwives). To this part, the
paradigm of ‘prohibition on intra-professional competition’ appears to serve a dual function;
scope-of-practice monopolies prohibit compatibilities between multiple functions (e.g. a
physician-pharmacist) and limit the possibilities of hiring paraprofessionals to increase the
productivity of a single (full-fledged professional) supplier. From a macro economic perspective,
scope-of-practice monopolies serve to limit experimentation with the division of labor out of
weariness of the establishment of new, highly competitive business models that force latent
incumbent suppliers to divert a part of their obtained rent towards investments in innovation in
order to ‘keep up’. As explained in textbox 4, the preferred choice of action in many such
scenarios is to lobby for restrictive regulations instead of investing in business innovations. A
cartel needs to prohibit intra-professional competition in order to sustain economic rents for the
other members.
The aforementioned remarks on the theoretical framework entail that in retrospect, the
theoretical framework should be slightly modified to incorporate the concept of intra-
professional competition and to subordinate ‘pressuring for tariffs’, ‘obstructing selective
contracting’ and ‘scope-of-activities monopolies’ to this overarching concept of ‘prohibitions on
intra-professional competition’.
64
5.3.2. Methodological framework The methodological framework sufficed to provide relevant results. With regards to the data
collection however, a few points merit attention. Some keywords provided hits from different
contexts. The word ‘concession’ provided only results in the context of ‘conceding to an
argument/negotiation’ and not in the sense of ‘obtaining the exclusive privilege to perform a
monopoly service in a closed market’. The keyword ‘subsidy’ provided no relevant hits. The
term ‘scope-of-activity monopoly’ appears to not be used much in the literature. Instead, the term
‘scope-of-practice monopoly’ appears to be the jargon. Using the latter term might have provided
more results. Some of the included studies did not use public choice jargon and a degree of
interpretation bias can surface as a result. To mitigate this risk, close attention is being paid to
the cohesiveness of terms used in the theoretical model and that of the keywords which are
presented in appendix 1. The public choice jargon matched the keywords used. Overall, the
construct validity of this research was high; the method chosen adequately reflect the concept
that was being researched. The risk of selection bias for the explorative literature review is
deemed fairly low: the screenings of titles and topics of search engine hits turned out to be a
simple process and easy to duplicate. The judgment as to whether or not the article meets the
topic of public choice is somewhat more sensitive to interpretation bias. To this end, the list of
potentially relevant articles in appendix 2 provides an overview of the potentially relevant
articles included that did and did not pass the pre-defined inclusion criteria (appendix 3). The
documents from the participatory however, are subject to extensive selection bias and guided by
the researchers own initiatives. The goal of this part however, is to provide anecdotal evidence.
As for the data analysis, the included studies varied tremendously in context, topic, perspective
and type of study. In addition, some of the articles did not explicitly state the issues at hands in
terms of public choice jargon. To fill this gap, the researcher had to judge the content of the
articles using rent-seeking theory. This process introduced an element of arbitration that can
influence the objectivity. The interpretation of such articles was subject to the judgment of the
researcher. The reproducibility of the content matrix (research question 1 to 5) might thus be
limited, as it depends on the extent of knowledge on rent-seeking theory combined with the
individual researcher’s interpretation of articles that do not explicitly cover the subject of rent-
seeking (e.g. nurse practitioners articles) and do not use similar jargon (public choice jargon). To
safeguard against interpretation bias, the exact quotes that the researcher used to decide on
checkmarks in the content matrix are presented in full in the thick matrix (appendix 4). This
reduces the probability of interpretation bias as readers can independently verify included
statements.
As mentioned in section 5.3.1., the theoretical framework and thus the data analysis for the
research questions could have been more coherent if the realm of ‘intra-professional
competition’ was included when extracting data from the included articles. Based on the fact that
this concept was not known to the researcher at the time of initiation of the study, it can be stated
that the content validity of this study was somewhat flawed; the method chosen failed to
encapsulate all dimensions of the social construct that was being studied.
Though deemed necessary to complete the picture on rent-seeking behavior, information on
‘expenditures to capture a source of rent’ was obfuscated. The extracted data on this subject
filled in the matrix was very brief and mostly limited to the use of generic terms such as
65
‘lobbying’ and ‘influence’. Thus, even though the articles mentioned words such as ‘lobby’ and
‘regulatory capture’ and these were subsequently noted down in the content matrix, no
significant information could be provided other than the fact that the terms were mentioned in
the articles. An improved version of the methodological framework would most likely require an
analysis in a different domain e.g. political science to gain a better understanding of the
mechanics of lobbying in healthcare.
Another weakness of the study is that the included articles, which were anticipated to vary
widely in scope and nature, were not subject to a quality assessment. This entails that no
profound evaluation was made of the level of authority or deference a specific publication
commends. Errors in these academic publications can therefore be duplicated in this explorative
literature review. Similarly, no precautions have been undertaken to test the timeliness of the
statements; older articles might allude to legislations that are no longer in place. The impact of
this is limited though, since public choice theory is fairly abstract and many of the included
articles communicated in public choice theory jargon.
Finally, the external validity of the study can be described as being high; despite the fact that the
included studies concerned different countries and different legal systems, the findings pertained
primarily to economic theory of creating producer rents through supply restrictions and are
universal by nature.
5.3.3. Results The compiled results of the study present a cohesive overview of rent-seeking activity in the
healthcare market. The amount of included articles indicated that a fair amount of knowledge on
this topic is already available. Nevertheless, the publications frequently centered on professional
guilds that restrict entry into the profession. In contrast to these publications, this explorative
literature review combined with the participatory study provides a comprehensive view of the
complex interplay between all the aspects involved in order to produce economic rent for a
concentrated group of suppliers. The findings from this study did not differ much from the
assumptions as laid out in the theoretical model. The evidence for goodwill as an entry fee
though, is not rock solid. No explicit information could be found on this topic in the included
body of literature. A possible explanation might be that the high entry fee covertly goes under
the misnomer ‘goodwill’ (#16) and might does not be labeled in the literature as an entry fee to a
closed market.
5.4. Recommendations The chapter concludes with recommendations for the scientific setup of the study as well as
recommendations for practical policy purposes.
5.4.1. Scientific recommendations Two specific recommendations are made that could aid further research.
66
1) Subordinate ‘pressuring for tariffs’, ‘obstructing selective contracting’ and ‘scope-of-activities
monopolies’ to the overarching concept of ‘prohibitions on intra-professional competition’ when
constructing the a theoretical model to analyze rent-seeking behavior in healthcare.
2) Include some form of quality appraisal for the included literature to reduce the risk of
duplicating erroneous statements from potentially low quality studies.
5.4.2. Policy recommendations Based on the findings of this research, several specific recommendations are made for
practical/policy purposes.
1) In healthcare, many terms used by the medical community of interest can be interpreted
different if perceived from a rent-seeking paradigm; ‘quality assurance’ equals tight restrictions
on market entry, ‘the war on quackery’ equals reducing the availability of substitute services,
‘increased educational requirements’ equals raising the operational cost for less advanced
suppliers, ‘tariffs’ equals a legal instrument by which a cartel can enforce price-fixing
agreements, ‘nurse’s autonomy’ equals a plight for amendments in ‘scope-of-practice
monopolies’ and ‘spreading awareness’ equals attempts from the medical community of interest
to broaden their market share by e.g. including a wide range of social problems as requiring
medical care (and subsidization). Third-party insurers and policy makers can use knowledge on
rent-seeking behavior in healthcare to anticipate negotiating positions from the medical
community of interest based solely on economic considerations.
2) When considering why healthcare delivery systems are fairly stagnant and ‘not open to
change’, note that amongst suppliers there are tacit prohibitions on intra-professional competition
that significantly handicap the range of organizational experimentation and affects the supplier’s
attitude towards innovations. If one cartel member gains a competitive advantage and increases
market share, it forces the other members to invest in similar innovations to maintain market
share. This reduces their income. The preferred course of action therefore is to prohibit such
innovations for all members. Third-party insurers and policy makers can use knowledge on rent-
seeking behavior in healthcare to anticipate the reaction of the medical community of interest
when attempting to introduce new business models to orchestrate healthcare provision.
3) Healthcare literature is to a large extent published and distributed by rent-seeking suppliers.
For example; the American Medical Association, heavily implicated as a rent-seeking agent
throughout this thesis, is one of the main trendsetters in healthcare policy literature. The same
holds true for the Dutch medical associations, as can be observed in the attached documents
(#18, #19). Thus, close attention needs to be paid to what healthcare policy literature comes from
which institutions. During political discourse, professional associations manipulate information
and reports to conceal wealth-redistribution effects of policies that they propose. Third-party
insurers and policy makers can use knowledge on rent-seeking behavior in healthcare to
adequately appraise information disclosed by the medical community of interest.
67
4) Government intervention in healthcare, when looked at from a rent-seeking perspective, to a
great extent promotes the interest of the medical community of interest, the concentrated benefits
group. The argument of government intervention in healthcare i.e. ‘socialized medicine’ is thus
not solely an ideological one, but is intertwined with many complex economic constructions that
contrive monopoly rents, capture income transfers and essentially redistribute wealth towards the
medical community of interest at the expense of the diffuse cost group. Third-party insurers and
policy makers can use knowledge on rent-seeking behavior in healthcare to appraise new policy
proposals that entail government intervention in the regulation, financing or provision of
healthcare.
Problem statement: Which studies have been conducted that investigate the methods by which
rent-seeking actors capture income transfers within the context of healthcare, what do these
studies indicate about how production output restrictions are contrived, how do rent-seeking
actors induce the government to impose such restrictions according to the studies and what
anecdotal evidence can be obtained on the practice of rent-seeking in the context of the
Curaҫao healthcare market?
Answer: 27 Academic articles provided in-depth knowledge on rent-seeking theory and its
application in the healthcare market. Monopoly rents and increasing the demand for medical
services creates income transfers for the medical community of interest. Total industry supply is
restricted through regulation that protects incumbent suppliers from both external as well as
internal competition. Rent-seekers integrate with politics and regulatory agencies to contrive
policies that create sources of economic rent. The findings of the participatory study mirror all
the theoretical assumptions.
68
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73
Documents participatory study
The participatory study conducted at the social insurance bank (S.V.B.) in Curaҫao provided the
opportunity for the collection of anecdotal evidence. It should be noted however, that as rent-
seeking is a covert activity, the exact interpretations might be subject to different views. The
social insurance bank acknowledges that the authenticity of the evidence collected in this study is
instrumental to the understanding of the healthcare market in Curaҫao. The documents, some of
which are in physical possession of the social insurance bank, contain no legal bearing of
significance. One document concerning goodwill fees which indicated that medical specialist
make explicit use of the term ‘entry fee’ when stipulating admittance to a partnership was
deemed confidential and could not be included for the purpose of this study.
74
1. Letters from two hospitals Note: ‘PP’ stands for ‘Pro Pauper’ and is tax-financed healthcare provision for low income
groups. The PP fund engulfs around 30% of total healthcare spending in Curaҫao and is a
substantial source of income for the medical community of interest*. The first letter also makes
mention of the fact that access to the main hospital (SEHOS) for specialist is arbitrarily
defined**.
*See next page*
*Gravelle (1985): “Thus they will favor and promote legislation which (i) increases the demand
for their services (e.g. state financed health insurance for low income groups);”
**Krauss, Ratner & Sales (1997): “Denial by an "essential facility" controller to a competitor of
access to a process or facility that is essential to the continued competitive influence of that firm
or person denied access (see MCI Communications v. American Telephone and Telegraph Co.”
75
2. Letter from gynecologist association
Objections against selective contracting
*see next page*
Riemer-Hommel (2002): “The sickness funds have experienced a change in the definition of
their role, once an active player negotiating individual contracts they have become a passive
payer bound by collective agreements.”
76
3. Turf conflict midwifery-gynecologist
Gynecologist increase the demand for their services at the expense of midwifery services.
Source: Nivel. (2012). Evaluatie van de structuur en zorgverlening van de
eerstelijnsgezondheidszorg op Curaҫao. Retrieved April 25, 2014 from:
http://www.nivel.nl/sites/default/files/bestanden/Rapport-evaluatie-eerstelijnszorg-Curaҫao.pdf
Andrews (1986): “The recent report of the Graduate Medical Education National Advisory
Committee projects a physician oversupply and recommends that the number of graduates from
nurse-midwifery programs be limited because of the "unavoidable excess" of obstetricians
predicted.”
Gualdo, Narchi & de Campos (2013): “Doctors lobby against authorisation for nurse
midwives(and midwives)to perform normal births”
“In spite of obstacles, midwives continue trying to claim their social space, seeking to maintain
and strengthen the profession. They seek effective insertion in the job market”
77
4. Parliamentary discussion#1
Scope-of-activity monopolies and turf protection with regards to eye care in Curaҫao.
Source: parliamentary debate accompanying document #7)
Young (1985): “The monopoly of professional autonomy is also associated with economic gain.
Professionalization of optometry and licensure of medical laboratory personnel have led to
increased prices and restrictions on the availability of service.”
78
5. A plight for stricter regulation The medical community of interest in Curaҫao pleads for tighter entry restrictions in public
communications.
Source: Nivel. (2012). Evaluatie van de structuur en zorgverlening van de
eerstelijnsgezondheidszorg op Curaҫao. Retrieved April 25, 2014 from:
http://www.nivel.nl/sites/default/files/bestanden/Rapport-evaluatie-eerstelijnszorg-Curaҫao.pdf
van den Bergh & Faure (1991): “Physicians and pharmacists enjoy a well-protected monopoly.
The definition of medical services is strongly monitored by the physicians themselves.”
Krauss, Ratner & Sales (1997): The power of a credentialing system to control prices and output
will more ordinarily be conferred indirectly from the ability to restrict the number of providers
of a service and to control the nature of the service provided. This control in turn influences the
costs of providing the service and restricts the availability of the service. Both effects influence
the prices charged for the service and the amount of that service ultimately purchased. In
addition, the power to dictate who will practice, and what the qualifications for practice must be,
ultimately strongly influences what the underlying service will look like for consumers and who
the providers will be. The likely purpose of a credentialing or standardizing organization may
very well be to achieve such influence. If the organization maintains the power to control the
level of consumer choice in the industry as a whole, it possesses monopoly power.”
“Second, psychology practitioners need to consider whether a real reason for the credential or
standard system is the desire by some practitioners in the industry to eliminate, discourage, or
hamper practices and practitioners that current providers perceive to be undesirable compared
to their own practices and ideas. Is the true desire to control and limit alternatives that
consumers may find desirable, to entrench the status quo concerning education, theories of
practice, and experience, or to limit the total number of providers of a service? These motives,
although perhaps well-meaning, in fact are highly anticompetitive. The bias of the antitrust laws
is that industry behavior designed to effectuate these motives should be prohibited where
possible.”
79
80
6. Parliamentary discussion #2
Restricting out-of-state competition.
Note: the island of Sint Maarten is divided between a French part and a Dutch part with separate
legal systems.
Source: parliamentary debate accompanying document #7)
White (1987): "In addition to affecting the division of labor, mandatory licensure laws may
create barriers to geographic mobility and raise the cost of attracting out-of-state personnel,
who now must become licensed in a state in order to practice their occupation at all."
81
7. Law that restricts market entry
Total production output restrictions in Curaҫao.
82
Parliamentary debate accompanying the law:
83
8. Arbitrary entrance criteria
No formal criteria for restricting new entrants.
Source: Nivel. (2012). Evaluatie van de structuur en zorgverlening van de
eerstelijnsgezondheidszorg op Curaҫao. Retrieved April 25, 2014 from:
http://www.nivel.nl/sites/default/files/bestanden/Rapport-evaluatie-eerstelijnszorg-Curaҫao.pdf
Leffler (1978): “Supply restrictions might be achieved by somewhat arbitrary failure criteria for
which state-exam failure rates should be a better proxy”
84
9. Letter from physician association
Plight from the medical association to restrict market entry and to protect their ‘title’
*See next page*
van den Bergh & Faure (1991): “Physicians and pharmacists enjoy a well-protected monopoly.
The definition of medical services is strongly monitored by the physicians themselves.”
85
10. Control over accreditation
Control over accreditation of general practitioners (‘huisarts’):
Source: www.chv-site.org
Note: CHV stands for ‘Curaҫaosche Huisartsen vereniging’
Krauss, Ratner & Sales (1997): “If an industry wide specialty credentialing or standardsetting
organization gains too much power, it may at some point be susceptible to a claim that the group
in control of the system has monopoly power and is using the power to maintain or obtain
power.”
“The power of a credentialing system to control prices and output will more ordinarily be
conferred indirectly from the ability to restrict the number of providers of a service and to
control the nature of the service provided. This control in turn influences the costs of providing
the service and restricts the availability of the service. Both effects influence the prices charged
for the service and the amount of that service ultimately purchased. In addition, the power to
dictate who will practice, and what the qualifications for practice must be, ultimately strongly
influences what the underlying service will look like for consumers and who the providers will
be. The likely purpose of a credentialing or standardizing organization may very well be to
achieve such influence. If the organization maintains the power to control the level of consumer
choice in the industry as a whole, it possesses monopoly power.”
“Second, psychology practitioners need to consider whether a real reason for the credential or
standard system is the desire by some practitioners in the industry to eliminate, discourage, or
hamper practices and practitioners that current providers perceive to be undesirable compared
to their own practices and ideas. Is the true desire to control and limit alternatives that
consumers may find desirable, to entrench the status quo concerning education, theories of
practice, and experience, or to limit the total number of providers of a service? These motives,
although perhaps well-meaning, in fact are highly anticompetitive. The bias of the antitrust laws
is that industry behavior designed to effectuate these motives should be prohibited where
possible.”
86
87
11. Demanding economic credentialing
Source: Nivel. (2012). Evaluatie van de structuur en zorgverlening van de
eerstelijnsgezondheidszorg op Curaҫao. Retrieved April 25, 2014 from:
http://www.nivel.nl/sites/default/files/bestanden/Rapport-evaluatie-eerstelijnszorg-Curaҫao.pdf
Cimasi (2008): Although the term ‘‘economic credentialing’’ does include such economic factors
as the frequency of physician’s use of the hospital and the physician’s ability to use hospitals
facilities in an economically efficient manner, it recently has begun to include such retaliatory
practices as the removal from the hospital medical staff of doctors who have a financial interest
at a competing specialty facility.
88
12. Denying hospital privileges
Denying hospital privileges to competing medical specialists. Two newspaper excerpts.
Source: www.antilliaansdagblad.com
Krauss, Ratner & Sales (1997): “Denial by an "essential facility" controller to a competitor of
access to a process or facility that is essential to the continued competitive influence of that firm
or person denied access (see MCI Communications v. American Telephone and Telegraph Co.)”
89
Source: www.caribischnetwerk.ntr.
*See next page*
90
91
13. Price-fixing amongst pharmaceutical importers Price-fixing amongst pharmaceutical import cartel members with and without legislation.
Source: Diaz (2009)
Van den Bergh & Faure (1991): “Ethical rules that set minimum prices for the services of the
professions can be considered the ultimate restrictions on intraprofessional competition.”
"Prices of pharmaceutical specialties and other medicines are subjected to a specific set of price
regulations, The Minister of Economic Affairs may set maximum prices and distribution margins
and may limit or prohibit the allowance of rebates.” Current regulation allows a distribution
margin of 13.1 percent to the wholesaler and 31 percent to the pharmacist. In addition,
professional ethics prohibit under- or overcharging. Both acts are said to damage the prestige of
the profession."
92
14. Prohibiting expedient division of labor Deterring intra-professional competition by restricting the use of adjacent (para-)professionals
Source: Een vestigingsbeleid in de Gezondheidszorg voor het Eilandgebied Curaçao. Een advies
van de Werkgroep ontwikkeling Vestigings- en Investeringsbeleid voor het Eilandgebied
Curaçao ten behoeve van de Gezondheidssector (WeVIG). (2003).
Van den Bergh & Faure (1991): “Restrictions on cooperation and partnerships complement
limitations on advertising by making it more difficult for one professional to gain a competitive
advantage over another. Incompatibilities prohibit the combination of adjacent professions.
Changes in a profession often occur as a consequence of a change in the “division of labor” or
through diversification. The prohibition on mentioning specialties, together with a strict regime
of incompatibilities, thus hinder the development of alternative forms of business organization.
Cooperation with other professions may yield important efficiencies that are now limited or even
excluded by professional ethics.”
93
15 .Certificate of need laws
‘Certificate of need’ laws to arbitrarily control the introduction of new (technical component)
facilities.
Source: Een vestigingsbeleid in de Gezondheidszorg voor het Eilandgebied Curaçao. Een advies
van de Werkgroep ontwikkeling Vestigings- en Investeringsbeleid voor het Eilandgebied
Curaçao ten behoeve van de Gezondheidssector (WeVIG). (2003).
Cimasi (2008): “The Florida legislature passed a bill prohibiting the licensure of new specialty
hospitals. A hospital may not be licensed if 65% of its patients received cardiac, orthopedic, or
cancer services or if it restricts its medical and surgical services primarily to cardiac,
orthopedic, surgical, or oncology specialties. Although ambulatory care services are not
specifically covered by the moratorium, the moratorium is a significant victory for the hospital
industry in its battle to protect hospitals from limited-service providers.”
94
16. Goodwill as an entry barrier
Goodwill as a monopoly strategy amongst medical specialist in the Dutch Kingdom.
Source: Coopers & Lybrand (1994)
95
17. Economic and political integration by pharmaceutical wholesalers
Source: Diaz (2009).
Chu (2008): "The $200-billion industry not only has access to the government’s decisionmaking
process, but it is indeed so politically influential that ‘‘PhRMA [the Pharmaceutical Research
and Manufacturers of America], this lobby, has a death grip on Congress,’’
96
18. Request for legal advice for physician association
The following letter concerns correspondence between the Curaҫao physician association and the
Netherlands physician association. The Curaҫao association seeks legal counsel from its Dutch
counterpart.
The letter indicates four things:
1) The physician association wants to make a collective agreement with the sickness funds that
ensures that the sickness funds only contract with ‘registered’ suppliers.
2) That the physician association is worried about intra-professional competition in the form of
professionals hiring paraprofessionals to increase production and thus accept larger capitation
contracts. The association is especially worried about the threat that this poses to incumbent
suppliers who do not engage in such entrepreneurial activity (see: #14)
3) The sickness funds agree to restrict their contracts to registered physicians, but demands to see
proof of increased quality on a yearly basis. This requirement to provide genuine quality
improvements upsets the physician association, indicating that their sole purpose is market entry
restrictions and not education.
4) The true motive of the physician title is to protect from competition from new medical
graduates (‘basisarts’). Incumbent physicians are pardoned (grandfather clause).
Van den Bergh & Faure (1991): “However, even if the professional group as a whole is not a
successful rent-seeker, specific subgroups within the profession may enjoy significant benefits
through intraprofessional transfers. This is clear when grandfather clauses protect older
professionals.”
Gravelle (1985): “When the licensing conditions are tightened legislation invariably exempts
those already practising . Such ‘grandfather clauses’ do not benefit consumers but may raise the
rents of existing practitioners.”
97
19. Legal response to physician association
The following letter concerns correspondence between the Curaҫao physician association and the
Netherlands physician association. The Curaҫao association receives legal counsel from its
Dutch counterpart.
The letter indicates three things:
1) The motive behind the introduction of the physician title in 1973 in the Netherlands served to
protect established suppliers from medical graduates. Incumbent suppliers were pardoned
(grandfather clause).
2) The association aims to prohibit experimentation with the division of labor; according to the
cartel, an individual professional should not be allowed to be able to employ several
paraprofessionals (medical graduates) to gain a competitive edge (see: #14).
3) Collective agreements concerning further educational requirements with sickness funds have
served to create closed systems of which entry registration (accreditation points) is administered
by the incumbent suppliers.
Van den Bergh & Faure (1991): “However, even if the professional group as a whole is not a
successful rent-seeker, specific subgroups within the profession may enjoy significant benefits
through intraprofessional transfers. This is clear when grandfather clauses protect older
professionals.”
Gravelle (1985): “When the licensing conditions are tightened legislation invariably exempts
those already practising. Such ‘grandfather clauses’ do not benefit consumers but may raise the
rents of existing practitioners.”
98
20. Control over market entry through accreditation
Note that the association aspires to become a public administrative body with legally authority
over the registration of all suppliers (‘publieksrechtelijke bedrijfsorganisatie’). Also, the
physician association refuses to cede autonomy over the accreditation process. This is necessary
to ensure that it remains in function as an arbitrary imposable restriction by the established
suppliers.
Source: Social insurance bank note meetings archives
Krauss, Ratner & Sales (1997): “If an industry wide specialty credentialing or standardsetting
organization gains too much power, it may at some point be susceptible to a claim that the group
in control of the system has monopoly power and is using the power to maintain or obtain
power.”
“The power of a credentialing system to control prices and output will more ordinarily be
conferred indirectly from the ability to restrict the number of providers of a service and to
control the nature of the service provided. This control in turn influences the costs of providing
the service and restricts the availability of the service. Both effects influence the prices charged
for the service and the amount of that service ultimately purchased. In addition, the power to
dictate who will practice, and what the qualifications for practice must be, ultimately strongly
influences what the underlying service will look like for consumers and who the providers will
be. The likely purpose of a credentialing or standardizing organization may very well be to
achieve such influence. If the organization maintains the power to control the level of consumer
choice in the industry as a whole, it possesses monopoly power.”
“Second, psychology practitioners need to consider whether a real reason for the credential or
standard system is the desire by some practitioners in the industry to eliminate, discourage, or
hamper practices and practitioners that current providers perceive to be undesirable compared
to their own practices and ideas. Is the true desire to control and limit alternatives that
consumers may find desirable, to entrench the status quo concerning education, theories of
practice, and experience, or to limit the total number of providers of a service? These motives,
although perhaps well-meaning, in fact are highly anticompetitive. The bias of the antitrust laws
is that industry behavior designed to effectuate these motives should be prohibited where
possible.”
99
21. Creating demand for the treatment of broad social conditions Entrepreneurial foundations in Curaҫao aim to spread awareness of the need for professional
treatment of broad social conditions. These foundations are tailored to the profession of the
entrepreneur whose services are employed by the foundation (2 newspaper excerpts).
White (2013): “The challenge is not simply invention of new technologies for treatment –
although that can raise spending if fees for new services are higher than fees for old, or if the
service induces new demand because it is easier to perform. Rather, “need” is created in the
media through continual promotion of supposed medical progress. Individual and social
difficulties are medicalized, as when U.S. students who do not pay attention in school were
redefined as victims of attention deficit hyper-activity disorder. Advertising spreads
“awareness” of medical conditions. Campaigns for prevention often justify and induce more
services, such as anti-cholesterol medication. In this context dedicated financing for medical
care, as we will see below, can mean the revenue side of the equation is more clearly in play for
health care than for most other programs (except pensions).”
Young (1985): “The broadening of medicine to include treatment of broad social conditions such
as aging, alcoholism, and juvenile delinquency is clearly market expansion.”
Source: www.versgeperst.com
100
Source: www.caribischnetwerk.ntr.nl
Note that ‘gehandicaptenbeleid’ refers to the ‘Algemene Verzekering Bijzondere Ziektekosten’
(General Insurance Exceptional Medical Expenditures) fund, an earmarked tax in Curaҫao that is
meant for long term and chronic care. The fund is the prime target of many entrepreneurial
foundations.
101
102
103
Appendix 1: Search results per database per keyword: EBSCO host : CINAHL, EconLit & Medline
Science
Direct
date EBSCO
host
date
Healthcare Lobby Public choice
theory
2 20-05-
2014
548 22-05-
2014
Rent-seeking/
rentseeking /
rent seeking
19 ,, 42 ,,
Protectionism 25 ,, 13 ,,
Barrier to
entry/
barrier-to-
entry
19 ,, 856 ,,
Licensure 71 ,, 63 ,,
Concession 60 ,, 11 ,,
Turf
protection
18 ,, 77 ,,
Turf war 12 ,, 91 ,,
Turf conflict 0 ,, 64 ,,
Rent-
defending
0 ,, 79 ,,
Limit
competition
1 ,, 153 ,,
Restrict
competition
3 ,, 130 ,,
Selective
contracting
2 ,, 52 ,,
Tariffs 67 ,, 107 ,,
Price-fixing 3 ,, 117 ,,
Floor prices 2 ,, 78 ,,
Monopoly 99 ,, 53 ,,
Cartel 17 ,, 3 ,,
Subsidy 168 ,, 72 ,,
Anti-trust 9 ,, 161 ,,
Goodwill 43 ,, 53 ,,
Scope-of-
activity
monopoly
0 ,, 137 ,,
Numerus
fixus
0 ,, 18 ,,
Medical
students
admittance
0 ,, 279 ,,
104
cap
Market
saturation
1 ,, 172 ,,
Regulatory
capture
3 ,, 97 ,,
Revolving
door
9 ,, 183 ,,
Conflict-of-
interest/
conflict of
interest
516 ,, 265 ,,
Financial ties 3 ,, 143 ,,
Bribery 24 ,, 6 26-05-
2014
Campaign
contributions
17 ,, 170 26-05-
2014
Special
interest group
69 ,, 440 26-05-
2014
Political
power
65 ,, 621 26-05-
2014
Pressure
group
36 ,, 367 27-05-
2014
Priority
setting
35 ,, 123 27-05-
2014
105
Science
Direct
date EBSCO
host
date
Medical
care
Lobby Public choice
theory
11 21-05-
2014
840 27-05-
2014
Rent-seeking/
rentseeking /
rent seeking
46 ,, 624 ,,
Protectionism 36 ,, 59 ,,
Barrier to
entry/
barrier-to-
entry
46 ,, 934 ,,
Licensure 200 ,, 485 ,,
Concession 181 ,, 126 ,,
Turf
protection
4 ,, 431 ,,
Turf war 22 ,, 438 ,,
Turf conflict 1 ,, 423 ,,
Rent-
defending
0 ,, 401 ,,
Limit
competition
4 ,, 549 ,,
Restrict
competition
7 ,, 537 ,,
Selective
contracting
7 ,, 464 ,,
Tariffs 148 ,, 156 ,,
Price-fixing 13 ,, 489 ,,
Floor prices 3 ,, 493 ,,
Monopoly 333 ,, 1 ,,
Cartel 41 ,, 35 ,,
Subsidy 416 ,, 472 ,,
Anti-trust 26 ,, 530 ,,
Goodwill 107 ,, 204 ,,
Scope-of-
activity
monopoly
0 ,, 442 ,,
Numerus
fixus
0 ,, 188 ,,
Medical
students
admittance
cap
0 ,, 432 ,,
Market
saturation
4 ,, 559 ,,
106
Regulatory
capture
9 ,, 490 ,,
Revolving
door
35 ,, 465 ,,
Conflict-of-
interest/
conflict of
interest
404 ,, 641 ,,
Financial ties 5 ,, 529 28-05-
2014
Bribery 50 ,, 32 ,,
Campaign
contributions
38 ,, 1 ,,
Special
interest group
142 ,, 783 ,,
Political
power
218 ,, 946 ,,
Pressure
group
155 ,, 718 ,,
Priority
setting
76 ,, 498 ,,
107
Appendix 2: Possibly relevant articles: 82 (27 upon application of inclusion
form) 1. Hauck K. & Smith P.C. (2014) Public Choice Analysis of Public Health Priority Setting.
Encyclopedia of Health Economics, 2014, Pages 184-193.
2. C. Paton. (2008). Health Policy: Overview. International Encyclopedia
of Public Health, 2008, Pages 211-22.
3. Bouchard R.A. (2012). Patently Innovative: How Pharmaceutical Firms Use Emerging
Patent Law to Extend Monopolies on Blockbuster Drugs. 6 – Implications of empirical
data: are pharmaceutical linkage regulations a success? (Woodhead Publishing Series in
Biomedicine)
4. Amore M.D. & Bennedsen M. (2013). The value of local political connections in a low-
corruption environment. Journal of Financial Economics 110(2): 387-402.
5. Ells C. & MacDonald C. (2002). Implications of Organizational Ethics to Healthcare.
Healthcare Manage Forum 15(3):32-8.
6. Cramer H. Dewulf G. & Voordijk H. The barriers to govern long-term care innovations:
The paradoxical role of subsidies in a transition program. Health Policy 116(1): 71-83.
7. Lezotre P-L. (2013). Part II – Value and Influencing Factors of the Cooperation,
Convergence, and Harmonization in the Pharmaceutical Sector. Academic Press.
8. Anderson G.M., Halcoussis D., Johnston L. & Lowenberg A.D. (2000). Regulatory
barriers to entry in the healthcare industry: the case of alternative medicine. The
Quarterly Review of Economics and Finance, 40(4): 485-502.
9. Cohen S.S. & Juszczak L. (1997). Promoting the nurse practitioner role in managed care.
Journal of Pediatric Health Care 11(1): 3-11.
10. Kelner M., Wellman B., Boon H. & Welsh S. (2004). Responses of established healthcare
to the professionalization of complementary and alternative medicine in Ontario. Social
Science & Medicine 59(5): 915-930.
11. Souba W.W. (1999). How competitive forces mold strategy in academic surgery. Surgery
125(6): 616-629.
12. Cimasi R. (2008). The Attack on Ancillary Service Providers at the Federal and State
Level. The Orthopedics clinics of North America 39(1): 103-121.
13. Horev T. & Babad Y.M. (2005). Healthcare reform implementation: stakeholders and
their roles—the Israeli experience. Health Policy 71(1): 1-21.
14. Yu X., Li C. Shi Y. & Yu M. (2010). Pharmaceutical supply chain in China: Current
issues and implications for health system reform. Health Policy 97(1): 8-15.
15. Gualda D. M. R., Narchi N.Z. & de Campos E.A. (2013). Strengthening midwifery in
Brazil: Education, regulation and professional association of midwives. Midwifery 29:
1077-1081.
16. Ottersen P.O.P., Dasgupta J., Blouin C., Buss P., Chongsuvivatwong V., Frenk J.,
Fukuda-Parr S., Gawanas B.P., Giacaman R., Gyapong J. Leaning J., Marmot M.,
McNeill D. Mongella G.I., Moyo N., Møgedal S., Ntsalaba A., Ooms G., Bjertness E. &
108
Lie A.L., Moon S., Roalkvam S., Sandberg K.I. & Scheel I.B. The political origins of
health inequity: prospects for change
17. Moynihan R. (2009). Doctors and drug companies: Is the dangerous liaison drawing to an
end? Zeitschrift für Evidenz, Fortbildung und Qualität im Gesundheitswesen 103(3): 141-
148.
18. Schetky D.H. (2008). Conflicts of Interest Between Physicians and the Pharmaceutical
Industry and Special Interest Groups. Child and Adolescent Psychiatric clinics in North
America 17(1): 113-125.
19. Wiseman V., Mooney G., Berry G. & K.C Tang. (2003). Involving the general public in
priority setting: experiences from Australia. Social Science & Medicine 56(5): 1001-
1012.
20. Chinitz D., Meislin R & Alster-Grau I. (2009). Values, institutions and shifting policy
paradigms: Expansion of the Israeli National Health Insurance Basket of Services. Health
Policy 90(1): 37-44.
21. Morgan S., McMahon M., Greyson D. (2008). Balancing health and industrial policy
objectives in the pharmaceutical sector: Lessons from Australia. Health Policy 87(2):
133-145.
22. Giacomini M., Hurley J. & Stoddart G. (2000). The many meanings of deinsuring a
health service: the case of in vitro fertilization in Ontario. Social Science & Medicine
50(10): 1485-1500.
23. Landers S.H. & Seghal A.R. (2004). Health care lobbying in the United States. The
American journal of medicine. 116(7): 474-477.
24. Gunderman R.B. & Tawadros A. (2007). The Perils of Protectionism. Journal of the
American College of Radiology 4(5): 328-331.
25. Kickbusch I. (2000). The development of international health policies — accountability
intact? Social Science & Medicine 51(6).979–989.
26. EDITORIALS. (1991). European drug regulation— anti-protectionism or consumer
protection? 337 ( 8757): 1571–1572.
27. Gravelle H.S.E. (1985). Economic analysis of health service professions: A survey.
Social Science & Medicine 20(10): 1049-1061.
28. Singhal M. (2008). Special interest groups and the allocation of public funds. Journal of
Public Economics 92(3-4): 548-564.
29. van den Bergh & Faure R. (1991). Self-regulation of the professions in Belgium.
International Review of Law and Economics 11(2): 165-182.
30. Riemer-Hommel P. (2002). The changing nature of contracts in German health care.
Social Science & Medicine 55(8): 1447-1455.
31. Andrews L.B. (1986). Health care providers: The future marketplace and regulations
Journal of Professional Nursing 2(1): 51-63. This article has incredibly many useful
references on nurse practitioners vs medical specialists.
109
32. Baer H.A. (1989). The American dominative medical system as a reflection of social
relations in the larger society. Social Science & Medicine 28(11): 1103-1112.
33. Young W.B. (1985). The competition approach to understanding occupational
autonomy *: Expansion and control of nursing service. Journal of Professional Nursing
1(5): 283-291.
34. Krauss D.A., Ratner J.R., Sales B.D. (1997). The antitrust, discrimination, and
malpractice implications of specialization. Applied and preventive Psychology 6(1): 15-
33.
35. White J. (2013). Budget-makers and health care systems. Health Policy 112(3): 163-171.
Dickerson S.S. & Cambpbell-Heider N. (1994). Interpreting Political Agendas from a Critical
Social Theory Perspective
36. Nursing Outlook 42(6): 265-271.
37. de Voe J.E. & Short S.D. (2003). A shift in the historical trajectory of medical
dominance: the case of Medibank and the Australian doctors’ lobby. Social Science &
Medicine 57(2): 343-353.
38. Paul, C. (1984). Physician licensure legislation and the quality of medical care. Atlantic
Economic Journal, 12(4): 18-30.
39. Leffler, K.B. (1978). Physician licensure: Competition and monopoly in American
medicine. Journal of Law and Economics, 21(1), 165-186.
40. White W.D. (1987). The introduction of professional regulation and labor market
conditions; Occupational licensure of registered nurses. Policy Sciences 20: 27-51.
41. O’grady & Eileen T. (2012). An Astonishing Lack of Evidence and Vision, Coupled with
Unchecked Turf Protection. Nurse practitioner world news 18(11): 11-12.
42. Crawford M. (1990). Biotech companies lobby for Federal regulation. Science
248(4955): 546
43. Mullinix C. & Bucholtz D.P. (2009). Role and quality of nurse practitioner practice: a
policy issue. Nursing Outlook 57(2): 93-98.
44. Palmer C.E. (1992). Nurse-paramedic interactions: teamwork or turf wars? Prehospital &
Disaster Medicine 7(1): 45-50
45. Patoine B. (2008). Neuroimaging turf battles flare. Annals of Neurology 63(6): A13-A16.
46. Duffin C. (2006). 'Turf war' alert over ECP proposals. Emergency Nurse 14(5): 3.
47. Todd S. (2007). Another turf war. Modern Healthcare 37(28): 31-31.
48. Fahy K. (2005). Birth centres or turf war? Australian Midwifery News 5(3): 7-8.
49. Caraway V.D. (1999). Advanced practice. Turf war over prescriptive rights heats up.
Nursing Spectrum -- Florida Edition 9(22): 24
50. Morgan L. (1998). Turf war: nurse anesthetists and anesthesiologists butt heads.
NurseWeek 11(9): 27.
51. Kennedy M.S.(2001). The turf war rages on: new rulings in favor of nurse anesthetists
inflame some physician groups. American Journal of Nursing 101(4): 21.
110
52. Birch J. (2000). Turf war: clash over AMA petition to tighten regulations for advanced
practice nurses. NurseWeek 13(24):23.
53. Rushforth H & Glasper E.A. (1999). Specialist nursing; Implications of nursing role
expansion for professional practice. British Journal of Nursing 8(22): 1507-1513.
54. Seitz S. (1997). Pharmaceuticals: Manufacturers' price-fixing schemes challenged.
Journal of Law, Medicine & Ethics 25(4):325.
55. Furlong A. (2007). FTC charges doctor groups with price fixing. American Dental
Association News 38(4): 6.
56. Mantone J. (2006). Price-fixing allegations: orthopedic devicemakers targeted. Modern
Healthcare 36(32): 25.
57. (2000). Wisconsin Chiropractic Association and its director agree to settle FTC charges
of price-fixing. Dynamic Chiropractic 18(10): 47
58. Recht P.R & Garg R.K. (1992). Antitrust issues for the nurse anesthetist: some essentials.
Nurse Anesthesia 3(1): 14-19.
59. O'Hare P.K. (1994). Integrated healthcare systems. The goodwill dilemma. Healthcare
Financial Management. Journal Of The Healthcare Financial Management Association
48 (4): 20.
60. Lazarus A. (1995). The value of goodwill in medical practice. Medical Interface 8(11):
87-90.
61. Robeson III J.D. & Kaplan K.C. (2008). 10 myths of healthcare business valuation.
Healthcare Financial Management 62(10): 82-86.
62. Rypma J.A. (1991). The physician cartel--potential hospital federal antitrust liability in
class-based denial of staff privileges to clinical psychologists. Specialty Law Digest.
Health Care Law 149: 7-33.
63. Rushforth H. & Glasper E.A. (1999). Specialist nursing. Implications of nursing role
expansion for professional practice. British Journal of Nursing 8(22): 1507-1513.
64. Hawkes N. (2011). Lobby groups call for closure of "revolving door" between drug
regulators and industry. British Medical Journal 343: d8335.
65. Sorian R. (1984). The health lobby: making private interest public law. Part II. The New
Physician 33(9): 28-39.
66. Keiser K.R. & Jones W. Jr. (1986). Do the American Medical Association's campaign
contributions influence health care legislation? Medical Care 24(8): 761-766.
67. Landers S.H, Ashwini R. & Sehgal, M.D. (2000). How Do Physicians Lobby Their
Members of Congress? Internal Medicine 160(21): 3248-3251.
68. Reilly M. & Santerre R.E. (2013). Are Physicians Profit or Rent Seekers? Some Evidence
from State Economic Growth Rates. Journal of Health Care Finance 40(1): 79-92.
69. Page S. (2004). How physicians' organizations compete: protectionism and efficiency.
Journal of Health Politics, Policy & Law 29(1): 75-105.
70. Hecht F. & Hecht B.K. (1992). Descent into demonology and protectionism. American
Journal Of Human Genetics 51(4): 893-895.
111
71. Andolf G. (1999). The Medical Society and immigration of physicians, 1. Caring for the
patients or protectionism? Läkartidningen 96(45): 4946-4948.
72. Osmond T. (2008). Health is no place for turf wars. Nursing Australia 9(2): 5
73. Baerlocher M.O. (2007). Do turf wars kill patients? Canadian Association of Radiologists
Journal 58(2): 88-91.
74. Ulrich B. Upfront. Turf talk from the AMA. NurseWeek 13(15): 3.
75. Jaklevic M.C. (1999). AMA fighting turf war. Modern Healthcare 29(6): 12.
76. Gearon C.J. (2005). Medicine’s turf wars. U.S. News & World Report 138(4)
77. Birch J. Turf war: clash over AMA petition to tighten regulations for advanced practice
nurses. Nurse Week California 13(24): 23.
78. Moore J.D. Jr. (1995). Despite attempts at peace, AMA-ANA turf war rages on. Modern
Healthcare 25(31): 14.
79. Klaue S. (2006). Clinic mergers and cartel law (automatically translated). Der Chirurg;
Zeitschrift Für Alle Gebiete Der Operativen Medizen.
80. Bigham B.J. (1991). Medical monopoly -- threatening our freedoms? Chiropractic
Journal 5(12): 30-40.
81. Califano J.A Jr. (1995). Busting the physicians' monopoly. American Nurse 27(4): 5-7.
82. Chu. A. C. (2008). Special Interest Politics and Intellectual Property Rights: an Economic
Analysis of Strengthening Patent Protection in the Pharmaceutical Industry.
112
Appendix 3: Table inclusion form
Article/
reference#
1. Concerns the
topic
2. Contains the
words ‘lobby’
and ‘healthcare’
or synonyms.
3. Academic
publication
4. English
language
5. Full text
available
1 Y Y Y Y N
2 N Y Y Y N
3 Y Y Y Y N
4 N N Y Y Y
5 N N Y Y N
6 Y Y Y Y Y
7 N N Y Y N
8 Y Y Y Y Y
9 Y Y Y Y Y
10 Y Y Y Y Y
11 N N Y Y Y
12 N N Y Y Y
13 N Y Y Y Y
14 N Y Y Y Y
15 Y Y Y Y Y
16 N N Y Y Y
17 Y Y Y Y Y
18 Y Y Y Y Y
19 N Y Y Y Y
20 N Y Y Y Y
21 N Y Y Y Y
22 N Y Y Y Y
23 Y Y Y Y Y
24 Y Y Y Y Y
25 N Y Y Y Y
26 Y Y N Y Y
27 Y Y Y Y Y
28 N Y Y Y Y
29 Y Y Y Y Y
30 Y Y Y Y Y
31 Y Y Y Y Y
32 Y Y Y Y Y
34 Y Y Y Y Y
35 Y Y Y Y Y
36 Y Y Y Y Y
37 Y Y Y Y Y
38 Y Y Y Y N
39 Y Y Y Y Y
40 Y Y Y Y Y
41 Y N N Y N
113
42 N Y N Y Y
43 Y Y Y Y Y
44 N N Y Y N
45 Y Y N Y Y
46 Y Y N Y N
47 Y N N Y N
48 Y N N Y N
49 Y Y N Y N
50 Y Y N Y N
51 Y Y N Y N
52 Y Y N Y N
53 Y N Y Y N
54 Y N N Y Y
55 Y N N Y Y
56 Y N N Y Y
57 Y N N Y N
58 Y N Y Y N
59 N N N Y Y
60 Y N Y Y N
61 N N N Y Y
62 Y Y Y Y N
63 Y N Y Y N
64 Y Y N Y Y
65 Y Y Y Y N
66 Y Y Y Y N
67 Y Y Y Y Y
68 Y Y Y Y Y
69 Y Y Y Y Y
70 N N N N N
71 Y Y Y N N
72 Y N N Y Y
73 N N Y Y N
74 Y Y N Y N
75 Y Y N Y N
76 Y Y N Y N
77 Y Y N Y N
78 Y Y N Y N
79 Y N Y N N
80 Y Y N Y N
81 Y Y N Y N
82 Y Y Y Y Y
114
Appendix 4: Thick data matrix Study: Type of rent-seeking behavior studied:
1a) pressuring for
income transfers
1b) pressuring
for eligibility for
reimbursement
1c) pressuring for
subsidies for public
health interventions
1d) pressuring for
tariffs
1e)
obstructing
selective
contracting
1. Anderson,
Halcoussis, Johnston &
Lowenberg (2000)
“Medical licensure
creates a barrier
to entry into the
medical
profession. Like
any other
regulatory entry
barrier, licensure
has the effect of
cartelizing the
industry,
generating rents
for incumbent
practitioners”
“Allopathic
physicians as a
group clearly
faced a strong
incentive to lobby
state legislatures
for tighter
regulations to
protect them from
competition with
homeopaths and
other suppliers of
alternative
medicine.”
“Government
subsidies of
personal
healthcare serve to
increase the overall
demand for, and
thus the wages of,
doctors. The single
largest government
subsidy to
healthcare in the
U.S. is the
combined
Medicare/Medicaid
program.”
(Public health
principle ‘universal
access to care’)
2. Andrews (1986)
3. Baer (1989) "Consequently, the
emerging alliance
around the
turn of the century
between the
American Medical
Association
(AMA), which
consisted
primarily of elite
practitioners and
medical
researchers based
in prestigious
universities, and
the
industrial
capitalist class
ultimately
permitted
biomedicine to
115
establish political,
economic and
ideological
dominance over
rival medical
systems."
"In keeping with
the transformation
of the American
political economy
from competitive to
monopoly
capitalism, its
associated medical
system evolved
from a relatively,
although never
completely,
pluralistic
form to a
dominative one. In
this process,
allopathy, the
predominant but
not the clearly
dominant
medical system
during the
nineteenth century,
evolved into what
many medical
anthropologists
term
‘biomedicine’."
"As a result of the
financial backing
of corporate-
sponsored
foundations
for its research
activities,
biomedicine
asserted scientific
superiority and
clearly established
hegemony over
alternative medical
systems. None the
less, biomedicine’s
dominance over
rival medical
systems has never
been absolute."
4. Chu (2008) “The Government
is not a
disinterested party
in the economy. By
the very
nature of the
political process . .
116
., the government
has strong
incentives to
behave
opportunistically
to maximize the
rents of those with
access to the
government
decision-making
process . . . [I]t
means that the
government will
cartelize economic
activity in favor of
politically
influential parties.
In rare
cases the
government
designs and
enforces a set of
rules of the game
that
encourage
productive
activity.”
“In fact, given the
nature of the
industry,
it is easy to
understand that it
is in the drug
companies’ best
interest
to have access to
the policy-makers,
who can easily
return favors at
low
political costs. For
a blockbuster (a
drug that has sales
of over a billion
dollars a year), an
extension of the
patent’s effective
lifetime for a few
years could be
extremely
profitable given
the usually
negligible
marginal cost of
production for
drugs.”
5. Cimasi (2008) “These
technological
advances, together
with the cuts in
reimbursement for
“Some of the
changes in
Medicare
reimbursement
for outpatient
“Some of the
changes in
Medicare
reimbursement
for outpatient
117
professional
services by
managed care
organizations and
the Medicare
Resource-Based
Relative Value
Scale, have
resulted in
increasing
physician
ownership of
ancillary services
and technical
component
revenue
streams. These
developments have
resulted a ‘‘turf
war’’ between
physicians and
hospitals over who
should control
these revenues.”
“The turf war
between hospitals
and physicians
is the catalyst
driving the
increasingly
volatile
regulatory
environment
surrounding niche
providers.
In attempting to
protect what they
perceive as their
‘‘turf,’’ hospitals
have united in
their battle against
specialty and niche
providers. Both
the AHA,
representing not-
for-profit
hospitals,
and the Federation
of American
Hospitals,
representing
investor-owned
for-profit
hospitals, are
waging national
and local public
relations
campaigns
against what they
term ‘‘limited
services
services may be
characterized
as attacks on
specialty and
niche providers.
These
may not be
frontal attacks,
but they are, in
fact, attacks
because their
effect is felt
primarily by
freestanding
facilities and not
by hospital-
based outpatient
departments.
Freestanding
facilities are
more often
physician-owned
specialty or
niche providers.
Therefore,
changes in
Medicare
reimbursement
for outpatient
services
represent a
backdoor attack
on these
providers.”
“Equally
compounding the
debate
surrounding
the state of the
specialty hospital
moratorium is
the CMS refusal
to certify new
specialty
hospitals for
Medicare
reimbursement
[18]. The CMS is
withholding the
ability to receive
Medicare
payments from
newly opened
specialty
hospitals,
although the end
of the
moratorium
lifted the
prohibition
on new market
services may
be
characterized
as attacks on
specialty and
niche
providers.
These
may not be
frontal
attacks, but
they are, in
fact, attacks
because their
effect is felt
primarily by
freestanding
facilities and
not by
hospital-based
outpatient
departments.
Freestanding
facilities are
more often
physician-
owned
specialty or
niche
providers.
Therefore,
changes in
Medicare
reimbursement
for outpatient
services
represent a
backdoor
attack on these
providers.”
(By affecting
reimbursement
regulation, the
hospitals aim
to influence
purchasing
behavior of
third party
payers and
aim to limit
their
alternative
options i.e. a
prohibition on
selective
contracting)
118
providers.’’
“In June 2004, the
New Jersey
legislature
imposed a tax on
certain ambulatory
care facilities,
specifically
excluding those
owned by a
hospital. The
measure imposed a
3.5% tax on gross
revenues of
ambulatory care
centers and a 6%
tax on gross
receipts from
cosmetic
procedures. The
revenues raised by
the assessment will
compensate
hospitals for
charity care.
Facilities taxed
include
ambulatory care
services, facilities
providing
diagnostic imaging
services, and
outpatient cancer
centers. The
Medical Society of
New Jersey
opposed the
legislation
vigorously because
it imposed an
additional level of
taxation on the
physician-owners
of these facilities.
The facility itself is
taxed under the
corporate business
tax, and the
physician-owners
are taxed under
the personal
income tax code.
Physicians remain
uncompensated for
the charity care
provided in a
hospital.”
entry of
physician-owned
specialty
hospitals. With
powerful
interests on both
sides of this
debate, it is
uncertain what
the
future holds for
specialty
hospitals. This
lack of clarity
only compounds
the already
uncertain
regulatory
environment
surrounding
specialty
facilities and is
another factor
that must be
weighed
in valuing these
facilities.”
(The hospitals
are influencing
the
reimbursement
regulation to
affect the status
of free standing
niche clinics as a
potential rival
recipient of
reimbursement
revenue streams
for technical
component
revenues)
6. Cohen & Juszczak
(1997)
“At the other end
of the spectrum
in
California the
119
Department of
Commerce
interpreted the
state’s
Knox-Keene Act
as precluding
nurse
practitioners and
nurse midwives
from being
designated as
primary care
providers. Such
decisions
can arise even in
states with
broad scope of
practice
legislation
for nurse
practitioners and
despite
the precedents
established
under
state and federal
laws allowing
nurse
practitioners to
provide primary
care without
direct physician
supervision.
Thus nurse
practitioners
need to be
vigilant
regarding
insurance
policies in their
state and
to work to enact
laws and
promulgate
regulations
protecting their
practice and
ensuring direct
reimbursement
for their care.”
7. Cramer, Dewulf &
Voordijk (2013)
“A key barrier was
that the projects
were too focused
on getting
subsidies rather
than on the
possibility to
empower the
niche-innovations.
The problem is
that once a project
manager of an
120
organization is
aware of a subsidy,
he/she will apply
for it no matter if it
fits to the
organizational
vision. This is
possible, because
boards of directors
are not questioning
fully subsidized
projects.”
8. de Voe & Short
(2003)
“The AMA was
already getting a
bit anxious that it
(Medibank)
might lead to
some sort of
health policy that
wouldn’t be in
the best interest
of the
doctors”
(Medibank=
social insurance
= tax financed
reimbursement
scheme)
9. Dickerson &
Cambpbell-Heider
(1994)
“Restriction of
third party
insurance
reimbursement
mainly to
hospital and
physician
providers” (i.e.
nurses want in on
the
reimbursement
as well rather
than being
remunerated one
a wage basis
subordinate to a
reimbursement
receiving
physician)
10. Gravelle (1985) “The
A.M.A. and other
associations of
health care
professionals
will aim to
encourage
legislation which
enable
professionals to
charge higher
prices and to
reduce their costs
of service delivery
“Thus they
will favour and
promote
legislation which
(i) increases
the demand for
their services
(e.g. state
financed health
insurance for
low income
groups.”
(Applying for
“Thus they
will favour and
promote legislation
which (i) increases
the demand for
their services (e.g.
state
financed health
insurance for low
income groups.”
(Public health
principle ‘universal
access to care’)
“Thus they
would be less
likely to abide by
the professions’
tacit price fixing
and collusion and
less vulnerable to
punishment by
social ostracism.”
121
[50]. Thus they
will favour and
promote
legislation which
(i) increases
the demand for
their services (e.g.
state
financed health
insurance for low
income groups);
(ii)
enables them to
price discriminate
by charging fees
direct to patients,
rather than to a
single third party
reimburser who
can compare fess
across patients and
providers; (iii)
subsidize
complementary
inputs (e.g.
state subsidies to
hospitals or nurse
training benefits
doctors); (iv)
restrict the
availability of
substitute
services (e.g. the
A.M.A.‘s attempts
to prevent
osteopaths
practising in
hospitals and to
subsume them in
the medical
profession [53];
(v) restrain the
growth in
supply of licensed
professionals.”
eligibility for
reimbursement
for serving these
groups)
11. Gualda, Narchi &
de Campos (2013)
“In Brazil,
regulated health
occupations have
relatively closed
markets and
therefore the
offering of these
services is
delineated by
professional
corporations that
register an d
validate the
necessary
professional
degrees for
practice. In this
122
respect, the entry
of midwives into
the job market is
limited by the type
and scope of its
difficult regulation,
which ends up
guaranteeing
space for or even
handing over
exclusive property
rights to nurses
within the field of
practice.”
12. Gunderman &
Tawadros (2007)
“A cynical
observer
might foresee 3
components in the
lobbying activity of
any field such
as radiology: (1)
strict sanctions
against price
cutting, (2) tight
regulation
of entry into the
profession,
and (3) a tacit
agreement by
members
of the profession to
cover up
mistakes and
prevent feedback
about them from
reaching the
public.”
“Some radiologists
have responded
to competition by
promoting policies
and regulations
that limit the
performance and
interpretation of
imaging
examinations by
nonradiologists.
Proposals have
included
government-led
imaging center
accreditation
and physician
training
standards,
accreditation and
standards from
third-party payers,
more active
involvement of
“Some
radiologists have
responded
to competition by
promoting
policies and
regulations that
limit the
performance and
interpretation of
imaging
examinations by
nonradiologists.
Proposals have
included (..)
standards from
third-party
payers” (obstruct
others from
participating in
the revenue
stream generated
by eligibility for
reimbursement
by deciding the
standards that
these insurers are
to use)
“(1) strict
sanctions
against price
cutting,”
123
radiologists in
policymaking by
managed care
organizations and
hospital medical
staff office .
and calls for more
effective marketing
strategies aimed at
both these
groups and the
general public.
Although
motivated by
legitimate
concerns about
patient safety,
technical
and professional
quality, and
cost containment,
such proposals
bear some
resemblance to
calls for
protectionism.”
“Privately, some
legislators express
the view that
professional
organizations
are mere cartels,
intended to
protect the
economic interests
of
their members.”
13. Kelner , Wellman,
Boon & Welsh (2013)
“They
all worried that the
government might
divert resources
away from their
professions in
order to assist the
complementary
and alternative
medicine (CAM)
groups to upgrade
their educational
and research
programs. They
were even more
negative about the
possibility of CAM
practitioners being
included in the
provincial health
insurance scheme.
The vast majority
of
124
the leaders saw
government
funding as a zero
sum game,
in which they
would lose out if
CAM groups won
any
monetary
concessions.”
14. Krauss, Ratner &
Sales (1997)
“The power of a
credentialing
system to control
prices and
output will more
ordinarily be
conferred
indirectly from the
ability to restrict
the number of
providers of a
service and to
control the nature
of the service
provided. This
control in turn
influences the costs
of providing the
service and
restricts
the availability of
the service. Both
effects influence
the prices charged
for the service and
the amount of that
service ultimately
purchased. In
addition, the
power to dictate
who will practice,
and what the
qualifications for
practice must be,
ultimately strongly
influences what the
underlying
service will look
like for consumers
and who the
providers will be.
The likely purpose
of a credentialing
or
standardizing
organization may
very well be to
achieve such
influence. If the
organization
maintains the
power to control
125
the level of
consumer choice in
the industry as a
whole, it
possesses
monopoly power.”
“Second,
psychology
practitioners need
to consider
whether
a real reason for
the credential or
standard system is
the
desire by some
practitioners in the
industry to
eliminate,
discourage, or
hamper practices
and practitioners
that current
providers perceive
to be undesirable
compared to their
own practices and
ideas. Is the true
desire to control
and
limit alternatives
that consumers
may find desirable,
to entrench the
status quo
concerning
education, theories
of practice, and
experience, or to
limit the total
number of
providers of a
service? These
motives, although
perhaps well-
meaning, in fact
are highly
anticompetitive.
The bias of the
antitrust laws is
that industry
behavior designed
to effectuate these
motives should be
prohibited where
possible.”
15. Landers & Seghal
(2004)
16. Landers, Ashwini
& Sehgal (2000)
“Senate and
house legislative
assistants met
126
with an average
of 10.0 and 4.0
physicians per
month,
respectively. This
suggests that
approximately
29,000 such
meetings occur
annually. The
most common
issues discussed
were Medicare
reimbursement
(mentioned by 67
[81%] of 83
subjects)”
“One legislative
assistant said,
"physicians
should beware of
the impression
that their main
concern is
reimbursement
rates."
17. Leffler (1978) "Economic
literature has not
satisfactorily
specified the
objective function
of an occupational
cartel. Resolution
of this issue
presumably awaits
improved
models of group
behavior.
Nonetheless, any
reasonable
objective of
physicians
colluding via the
American Medical
Association (AMA)
should include the
promotion of rents
to currently
practicing
physicians.
Therefore,
the essential test of
the success of the
AMA in controlling
supply is to
examine the
returns to
physician
training."
"They estimated
127
that the additional
training required
by physicians
would only justify
income 17 per cent
greater than
dentists at a
discount rate of 4
per cent,9 thus,
concluding that
16.5 per cent of
physician
earnings between
1929 and 1934 is a
rent due to
"barriers to entry."
“While physicians
desire licensure in
hopes of short- or
long-run rents
(…)”
“As mentioned
above, Friedman
and Kuznets
indicate that the
high applicant-
to-acceptance
ratio in medical
training provides
prima facie
evidence of
entry barriers and
monopoly
returns.”
18. Moynihan (2009)
19. Mullinix &
Bucholtz (2009)
“The debate
around what is and
is not an
appropriate
role for the nurse
practitioner often
focuses on quality
of care; however,
the real issues may
be turf and
economic
defensiveness
in an increasingly
competitive
market.”
20. Page (2004)
21. Reilly & Santerre
(2013)
“The alternative
theory treats
physicians
as “rent seekers”
rather than profit
seekers. According
to this rent-seeking
theory, physicians,
particularly when
128
they are more
plentiful within a
given geographical
area,
induce the demand
for their services.
This wasteful
practice is referred
to as
supplierinduced
demand and is
consistent with
Roemer’s law that
“a built bed is a
filled bed.”
22. Riemer-Hommel
(2002)
“The sickness
funds have
experienced a
change in the
definition of
their role,
once an active
player
negotiating
individual
contracts they
have become a
passive payer
bound by
collective
agreements.”
23. Schetky (2008)
24. van den Bergh &
Faure (1991)
“The groups most
successful in
obtaining wealth
transfers are likely
to be small, single-
issue oriented, and
well organized.
The suppliers of
the rents are large
groups in the
general public,
which are difficult
to organize and
which face
information
problems. Under
these conditions
wealth transfers
take place from the
public as a whole
to well-organized
interest groups.
Politicians can be
seen as the
brokers of this
wealth transfer.
Politicians face
both incentives to
provide public
interest legislation
“Competition
among licensed
professionals can
be limited by
restrictions on
advertising, by
incompatibilities
and prohibitions of
partnerships and
cooperation with
other professions,
and, most
remarkably, by
direct regulation
of fees.”
"The public bodies
reach the highest
degree of
professionalization
when they become
autonomous with
respect to
remuneration.
Ethical rules that
set minimum
prices for the
services of the
professions can be
considered the
129
and incentives to
provide legislation
that protects the
interest
group. Regulations
will almost
certainly be
introduced if they
can be seen as a
response both to
public demand and
to the wishes of
pressure groups.
In the case of the
Belgian
professions, the
setting for wealth
transfers is
optimal.
Most professions
are well organized.
They do not face
start-up costs and
can exclude free
riders through
compulsory
membership in the
public bodies.”
ultimate
restrictions
on
intraprofessional
competition. The
extent to which the
professions
succeed in
obtaining
autonomy with
respect to fees
varies."
"As far as the
price of medical
care is concerned,
distinctions have
to be made
between different
categories of care
(physicians and
dentists, other
medical
professions,
pharmaceutical
products, care in
hospitals) and
between the price
paid by the patient
and the fee
received by the
professional. The
former price is the
difference between
the maximum price
for medical care
and the amount
reimbursed
by the health
insurance. The
latter price is
regulated: its
amount is fixed
in agreements
between the
medical profession
and the health
insurance sector."
"Prices of
pharmaceutical
specialties and
other medicines
are subjected to a
specific set of
price regulations,
The Minister of
Economic Affairs
may set maximum
prices and
distribution
margins and may
130
limit or prohibit
the allowance of
rebates.” Current
regulation allows
a distribution
margin of 13.1
percent to the
wholesaler and 3 1
percent to the
pharmacist. In
addition,
professional ethics
prohibit
under- or
overcharging.
Both acts are said
to damage the
prestige of the
profession."
25. White J. (2013) “The challenge is
not simply
invention of new
technologies for
treatment –
although that can
raise spending if
fees for new
services are higher
than fees for old, or
if the service
induces new
demand because it
is easier to
perform. Rather,
“need” is created
in the media
through continual
promotion of
supposed medical
progress.
Individual and
social difficulties
are medicalized, as
when U.S. students
who do not pay
attention in school
were redefined as
victims of attention
deficit hyper-
activity disorder.
Advertising spreads
“awareness” of
medical conditions.
Campaigns for
prevention often
justify and induce
more services, such
as anti-cholesterol
medication. In this
context dedicated
financing for
medical care, as we
131
will see below, can
mean the revenue
side of the equation
is more clearly in
play for health care
than for most other
programs (except
pensions).”
26. White W.D. (1987) "Mandatory laws
will impose
binding constraints
on the division of
labor if they force
consumers
or employers to
substitute licensed
personnel for
unlicensed
personnel.
Holding the level
of final output and
the quality of
services fixed, laws
will
tend to increase
the wages and
employment of
licensed personnel
and decrease
the wages and
employment of
unlicensed
workers, while the
overall impact will
be to increase the
price of output."
27. Young (1985) "The monopoly of
professional
autonomy is also
associated with
economic gain.
Professionalization
of optometry and
licensure of
medical laboratory
personnel
have led to
increased prices
and restrictions
on the availability
of service. Some
occupations
that have acquired
licensure,
ostensibly to
protect the public,
have benefited by
gaining median
earnings as much
as 50 per cent
greater than those
of
“The American
Medical
Association,
American Dental
Association,
American
Nurses'
Association, and
American
Hospital
Association were
shown by
Feldstein to
support
legislation they
perceived as (1)
increasing
demand
for their
services"
(Legislation on
what services are
eligible for
reimbursement
affects the
“The American
Medical
Association,
American Dental
Association,
American Nurses'
Association, and
American
Hospital
Association were
shown by Feldstein
to support
legislation they
perceived as (1)
increasing demand
for their services"
(Legislation that
guarantees public
health principle
‘universal access to
care’ affects the
demand for
medical services)
132
comparable
unlicensed
occupations"
"Nursing's
acquisition of
autonomy is
examined from the
perspective
of an occupational
interest group
competing with
other occupational
interest groups for
a market
monopoly.
Nursing and other
health occupations
are seen as
competing
within the policy
arena for
monopoly over the
market of health
care services
currently provided
or hoped to be
provided by these
interests."
demand for
services)
Total: 16 9 4 3 1
133
Table 4.3. Total production output restrictions Study: Type of rent-seeking behavior:
2a) Scope-of-activity monopoly 2b) Goodwill as a
barrier to entry
2c) Manipulating
licensing procedure
2d) Safety
regulations to
increase cost for less
advanced
competitors
1. Anderson,
Halcoussis,
Johnston &
Lowenberg (2000)
“State regulations restricting
the practice of alternative
medicine create rents for
physicians whose incomes are
protected from competition
with alternative providers.”
“Medical licensure
creates a barrier to
entry into the
medical profession.
Like any other
regulatory entry
barrier, licensure
has the effect of
cartelizing the
industry,
generating rents
for incumbent
practitioners”
Bronars and Lott
(1991)
point out that
licensure laws also
normally entail
some minimum
period of schooling.
Requiring trainees
to complete a
certain minimum
number of years of
training causes a
disproportionate
increase in the
opportunity cost of
entering the
profession for high-
ability potential
entrants relative to
low-ability entrants.
Consequently, more
stringent length of
schooling
requirements for an
occupation have the
effect of lowering
the average quality
of new entrants as
well as raising the
price of output.”
“Regardless of the
ostensible
motivation behind
requiring physicians
to undergo formal
continuing
education, such
mandatory
coursework
constitutes a de
facto entry barrier
confronting new
potential doctors.
Mandatory
continuing
education
requirements tend to
increase the price of
available medical
services and reduce
the quantity
supplied, the
necessary
precondition for the
creation of producer
rents.”
“In the late 19th and
early 20th century
the AMA set out to
close down
proprietary,
for-profit medical
schools, many of
which offered
training in
alternative
medicine, with the
express purpose of
restricting entry into
the profession.”
2. Andrews (1986) “In Andrews v. Ballard, health
care consumers wanted access
to acupuncturists, but the
medical practice act gave
licensed doctors a monopoly on
the provision of treatment and
so only doctors could perform
acupuncture. This meant that
people trained and experienced
“Already,
commentators are
speculating that the
oversupply may
cause doctors to
attempt to drive
their competent and
less costly
alternative
“The court held that
the medical
licensing
requirement was an
unconstitutional
infringement on the
patient's right to
make health care
decisions. The court
134
in acupuncture could not offer
it because they had no medical
license.”
competitors out of
business and
medical groups
have undertaken
lobbying efforts for
laws limiting nurses'
roles. The recent
report of the
Graduate Medical
Education National
Advisory Committee
projects a physician
oversupply and
recommends that
the number of
graduates from
nurse-midwifery
programs be limited
because of the
"unavoidable
excess" of
obstetricians
predicted.”
noted that there
were more narrowly
drawn means to
accomplish the
state's goal of safe
and effective
acupuncture.”
3. Baer (1989) "In responding to
Flexner’s negative
comments on eight
osteopathic schools,
the AOA lengthened
the courses of study
in osteopathic
schools to 4 years
and forced many of
them to shut their
doors. By 1926, only
six osteopathic
schools remained in
operation, and in
1940 the
Massachusetts
College of
Osteopathy also
closed."
(The 1910 Flexner
report was directly
financed by the
biomedicine
industry in order to
impose regulation
that raises the cost
for less advanced
competitors. Only
allopathic schools
received funding by
the biomedicine
industry to be able
to live up to the new
standards, whilst
competing schools
of thought were put
on the sidelines)
4. Chu (2008)
135
5. Cimasi (2008) “This fear on the part of the
part of hospitals
seems to have led to the
mounting of numerous attacks
on specialty and niche
providers in Congress
and state legislatures. At the
heart of these
battles is the technical
component of diagnostic
services and procedures. Some
attacks, such as the
‘‘designated imager’’
proposals, are part of a turf
war between radiologists and
other specialists over technical
component revenues. Other
attacks, such as the specialty
hospital moratorium,
are part of the war between
full-service community
hospitals and specialty
hospitals over those coveted,
‘‘profitable’’ Medicare
patients.”
“One of the primary attacks on
specialty and niche providers
on a state level is through the
use of certificate of need
(CON) laws. Because CON
laws stifle competition
and innovations in the delivery
of health care
services, it is not surprising
that specialty and niche
providers are more prevalent in
states without CON
regulations. A stringent CON
regulation can effectively
prevent or limit specialty and
niche providers from entering a
state, thereby protecting
general hospitals from
competition. A CON regulation
often includes different review
criteria for
hospital providers than for
physician organizations
seeking to add new equipment
or services.”
“The Florida
legislature passed a
bill prohibiting the
licensure of new
specialty hospitals.
A
hospital may not be
licensed if 65% of
its patients received
cardiac, orthopedic,
or cancer services
or if it restricts its
medical and
surgical services
primarily to
cardiac, orthopedic,
surgical, or
oncology
specialties.
Although
ambulatory care
services are not
specifically covered
by the moratorium,
the moratorium is a
significant victory
for the hospital
industry
in its battle to
protect hospitals
from limited-service
providers.”
“In a response to
the growing
prevalence of
specialty hospitals
such as ambulatory
care services,
however, general
hospitals are
engaging in a new
form of
credentialing
termed ‘‘economic
credentialing.’’
Although the term
‘‘economic
credentialing’’ does
include such
economic factors as
the frequency of
physician’s use of
the hospital and the
physician’s ability
to use hospitals
facilities
in an economically
efficient manner, it
recently has begun
to include such
retaliatory practices
“The American
College of
Radiology (ACR)
recently announced
plans to lobby for
legislation
requiring Medicare
to define standards
for physicians
performing
diagnostic imaging.
At
a December 2004
meeting, MedPAC
staff members
stated, ‘‘It’s
important for CMS
to set national
standards for each
imaging modality’’.
MedPAC endorsed
relying upon private
accreditation
agencies to develop
the standards.
Private
accreditation
agencies would most
likely be
organizations such
as the ACR, which
currently accredits
radiology
departments. ACR
facility
accreditation for a
specific imaging
modality requires
that physicians who
interpret diagnostic
imaging studies
meet ACR
qualifications for
that modality.”
“In light of these
recognized hospital
problems with
quality and charity
care, the current
attack on
limited-service
providers including
surgical hospitals
and diagnostic
imaging centers
(both of which
have a well-
documented history
of quality
improvements
and cost savings) is
136
as the removal from
the hospital medical
staff of doctors who
have a financial
interest at a
competing specialty
facility. Hospitals
that do not go as far
as blatantly
revoking the staff
privileges of
physicians who have
a financial interest
in
a nearby specialty
hospital
nevertheless
participate in the
attack on specialty
hospitals by
refusing to grant the
specialty hospital
the needed transfer
agreement, thereby
engaging in another
form of economic
credentialing. It is
precisely this
economic testing of
physician hospital
staff privileges,
without regard to
quality
of care, and the
refusal of needed
transfer agreements
to nearby specialty
hospitals that allow
general hospitals to
prevent specialty
hospitals and niche
providers from
entering the health
care marketplace.”
disingenuous at
best.”
“Justification for
many of these
attacks is being
sought under the
guise of promoting
quality and charity
care.”
6. Cohen &
Juszczak (1997)
“At In some states Medicaid
waivers have been catalysts for
other legislative initiatives
expanding nurse practitioner
scope of practice. For example,
until 1994 Tennessee only
allowed nurse practitioners to
write prescriptions at sites that
met certain criteria. This
impeded the ability of nurse
practitioners to reach
underserved populations or
to address the shortage of
primary care providers under
Tennessee’s Section 1115
waiver, known as TermCare.
Nurses in Tennessee used the
need for more primary
137
care providers as an impetus to
get
the state legislature to enact
revisions
of the prescription writing
statute.”
7. Cramer, Dewulf
& Voordijk (2013)
8. de Voe & Short
(2003)
9. Dickerson &
Cambpbell-Heider
(1994)
“The force of their underlying
assumptions about the nature
of health care is also supported
by licensure laws that continue
to restrict nurse scope of
practice and keep consumers
the most powerless
group of all”
“Laws and licensure
maintain physician
control and limit
autonomy of other groups.”
10. Gravelle (1985) “The licensure laws, enacted in
all U.S. states by 1898,
restricted practice to qualified
physicians.
The states effectively delegated
to the A.M.A. the task of
determining which medical
schools should
have their qualifications
recognized as being of
sufficiently high standard to
permit their graduates to
be licensed. As a result the
number of medical schools and
the doctor-population ratio
declined rapidly.”
“The occupation is likely to be
defined so widely that
professionals perform simple
tasks which could be done
equally well by less highly
trained staff; the wrong input
mix is adopted.”
“The arguments so far suggest
that professional
restrictions on the supply of
services are necessary to
ensure that professionals
provide good quality service.
Most economists (and some
sociologists)
writing in this area have tended
to adopt a more cynical
approach: the professions have
used the information
asymmetry argument to acquire
monopoly
“Legislation which
restricts the practice
of a profession to
the qualified,
frequently gives
members of the
profession effective
control over the
number of entrants.
Several authors
have sought to test
whether
the restrictions are
being exercised in
the interest of the
public or the
profession.
Unfortunately they
have come to rather
different
conclusions.
Maurizi, using
essentially the same
data as Moore,
found
that the admission
rate (number of
licences issued
divided by the
number of
applicants) was
negatively related to
the excess demand
for admission
(applicants divided
by the number of
existing licences)
across states for a
number of
“When the licensing
conditions are
tightened legislation
invariably exempts
those already
practising . Such
‘grandfather
clauses’ do not
benefit consumers
but may
raise the rents of
existing
practitioners.”
“Similarly, those
seeking entry into
the profession may
have to engage in
costly activities
which have little
social benefit, for
example passing
examinations in
esoteric subjects of
little relevance
for the practice of
their profession.”
138
powers in order to benefit the
profession and such powers are
not necessary to ensure good
quality health care.”
“Both Friedman and
Rottenberg draw attention to
the large number of U.S.
occupations for which a licence
is required (ranging from guide
dog trainers, tile layers and
barbers to pharmacists,
dentists and doctors) and the
frequently ludicrous
requirements which must be
met before a licence is
issued. They argue that such
entry restrictions are sought by
members of occupations in
order to reduce supply and
drive up the price of their
services and that the consumer
protection justifications are
spurious.
occupations
including
medicine, pharmacy
and dentistry. He
concluded that this
showed that state
licensing boards
were manipulating
the pass rate to
protect the income
of existing
licence holders. The
results are also
compatible with the
hypothesis that the
licensing boards
were maintaining
the quality of
entrants and that a
larger application
rate was associated
with a lower quality
of applicants.”
11. Gualda, Narchi
& de Campos
(2013)
“Doctors lobby against
authorisation for nurse
midwives(and midwives)to
perform normal births;nurses
oppose authorisation for health
agents to apply injections;
nurses
and doctors oppose the entry of
midwives into the job market.”
12. Gunderman &
Tawadros (2007)
“Are radiologists engaged in
battles
with other medical specialties
over the turf of imaging? For
example,is there a turf battle
between
radiology and cardiology over
the
use of computed tomography
and
magnetic resonance in the
diagnosis of diseases of the
heart and great vessels?”
“Some radiologists
have responded
to competition by
promoting policies
and regulations that
limit the
performance and
interpretation of
imaging
examinations by
nonradiologists.
Proposals have
included (..)
accreditation and
physician training
standards,
accreditation”
(control over
registration allows
for control over
total industry
supply)
13. Kelner ,
Wellman, Boon &
Welsh (2013)
“The argument that only
physicians have the
appropriate training to
properly diagnose a health
problem is another protective
“Currently, the
medical profession,
as the dominant
structural interest, is
in the prime position
139
mechanism.”
“The success of a profession in
occupying a jurisdiction
reflects the struggles of its
competitors as much as the
professions’ own efforts. Abbott
(1988) sees the history of
professions as the history of
recurring battles over turf, and
the key events in this history
are those that create new
jurisdictional boundaries or
abolish old ones. He agues that
a profession ‘cannot occupy a
jurisdiction
without either finding it vacant
or fighting for it’’.
to impose its version
of evidence on
others. This
requirement for
‘‘scientific’’
evidence creates a
major barrier for
CAM groups
wishing to gain
professional status.
14. Krauss, Ratner
& Sales (1997)
“In fact through their licensing
laws, many states have
prohibited psychologists from
practicing
outside of their areas of
expertise, and have instituted
penalties (warning, suspension,
and revocations of licenses)
for such infractions”
“Denial by an
"essential facility"
controller to a
competitor of access
to a process or
facility that is
essential to the
continued
competitive
influence of that
firm or person
denied access (see
MCI
Communications
v. American
Telephone and
Telegraph Co.”
“If an industry wide
specialty
credentialing or
standardsetting
organization gains
too much power, it
may at some point
be susceptible to a
claim that the group
in control of the
system has
monopoly power
and is using the
power to maintain
or obtain power.”
15. Landers &
Seghal (2004)
16. Landers,
Ashwini & Sehgal
(2000)
17. Leffler (1978) “It is widely believed among
economists that barriers to
entry into medical
practice have been erected for
the economic advantage of
those practicing
“Supply restrictions
might be achieved
by somewhat
arbitrary failure
criteria for which
state-exam failure
“A cartel
explanation for
physician licensure
does not make clear
predictions
as to the
140
medicine.” rates should be a
better proxy”
relationship between
examination
difficulties and the
independent
variables. With free
entry at or above a
given level of exam
difficulty, only
"grandfathers" can
get rents. Supply
restrictions might be
achieved by
somewhat arbitrary
failure criteria for
which state-exam
failure rates should
be a better proxy.”
18. Moynihan
(2009)
19. Mullinix &
Bucholtz (2009)
“The debate around what is
and is not an appropriate
role for the nurse practitioner
often focuses on quality of
care; however, the real issues
may be turf and economic
defensiveness
in an increasingly competitive
market.”
“The issue of quality of care,
clothed in the guise of concern
for public safety, continues
to be raised as a political tool
to limit non-physician
healthcare
provider expansion."
“Although the AMA
supports collaborative
arrangements with physician
assistants
(PAs) and nurse practitioners,
it long has
opposed non-physicians who
seek independent practice
rights that stray into the realm
of medicine.”
20. Page (2004)
21. Reilly &
Santerre (2013)
22. Riemer-
Hommel (2002)
23. Schetky (2008)
24. van den Bergh
& Faure (1991)
“Physicians and pharmacists
enjoy a well-protected
monopoly. The definition of
medical services is strongly
monitored by the physicians
themselves.”
“The profession of physician is
incompatible with the
"The case of the
pharmacists provides
especially strong
evidence of
intraprofessional
transfers. The argument
in favor of the
introduction of quantity
limits in
“This self-
regulation restricts
entry into the
profession”
“Entry barriers can
be erected either
directly
through the fixing of
“Entry barriers can
be erected either
directly
through the fixing of
a numerus dausus or
indirectly through
obligatory
apprenticeships
with particularly
141
profession of pharmacist.
The pharmacists had to lobby a
long time before they
succeeded in having their
monopoly protected against the
physicians. Until 1952 the
physicians who practiced
in country communes were
entitled to have their own
depository of medicines. In
1952 an Act was passed that
forbid the combination of the
two professions. The legislature
made its purpose very clear:
distributive justice required
that physicians who could earn
an honorable income should no
longer hinder young
pharmacists, who also obtained
a university degree, in earning
their living.”
the early seventies was
that an optimal
distribution of
pharmacies should be
guaranteed.
Obviously the
regulation limited
competition and
protected the income of
established pharmacies.
These effects have been
worsened by
grandfather clauses
in the regulation.
Pharmacies that were
already operating were
excluded from the
regulation. Again, a
significant
intraprofessional
transfer has been
realized. Since
the introduction of the
regulation the value of
existing pharmacies has
increased
spectacularly, which
has necessitated the
introduction of a
regulation concerning
the sale of pharmacies.
The take-over price may
not exceed the sum of
the value of the
furniture, as estimated
by an expert; the stock
of products belonging
to the pharmacist’s
profession, which is
also subjected to expert
opinion; and 150
percent of the average
gross profits of the last
five years, as proven by
income tax
documents.3x This
regulation was
introduced in order to
prevent sales at
exorbitantly high
prices, as is the case in
Belgium with the
purchase of notarys’
offices. In spite of the
regulation, in the
literature prices are
cited of ten to twenty
million Belgian francs.
There thus seems to be
a black market for
pharmacies, because
these prices largely
a numerus dausus
or indirectly
through obligatory
apprenticeships
with particularly
heavy duties and
lack of appropriate
remuneration.”
heavy duties and
lack of appropriate
remuneration.”
142
exceed the maximum
fixed by the regulation."
(Though not explicitly
using the term
‘goodwill’, these
‘surplus’ prices paid in
the black market for the
purchasing of
pharmacies hint towards
the same concept as
elaborated on in the
theoretical framework
of this paper i.e. new
entrants pay high fees to
established entrants to
gain entry on an
established
remuneration stream set
up in a closed market.)
25. White J. (2013)
26. White W.D.
(1987)
"Some nurses wanted to use
mandatory laws to completely
eliminate both practical nurses
and nurses' aides from bedside
nursing activities. Others
thought licensure of practical
nurses and elimination of aides
would be sufficient. In either
case, advocates argued
mandatory licensure would
provide a way to force RNs to
obtain licenses in the states
where they
worked and to control the use
of non-RNs in bedside nursing
activities, maintaining
RNs' position as leaders of the
nursing team and potentially
creating new employment
opportunities for surplus
nurses.
"In addition to
affecting the
division of labor,
mandatory licensure
laws may create
barriers to
geographic mobility
and raise the cost of
attracting out-of-
state personnel, who
now must become
licensed in a state in
order to practice
their occupation at
all."
(The licensing
board is
manipulating entry
by not accepting
licensed suppliers
from other state)
"But increased
economic pressures
on nurses are likely
to be accompanied
by mounting
political pressures
to use professional
regulation to protect
existing jobs and
possibly create new
ones. Already, for a
variety of reasons,
efforts are underway
to raise educational
standards for
registered nurses."
27. Young (1985) "Expanding nursing autonomy
affects the market
of other health occupations and
industries. These other groups
can be expected to respond to
nursing's
demand for autonomy
according to how this demand
is perceived as affecting their
own markets
or service monopolies.
According to Feldstein,
organized
nursing can expect support
from other health
occupations and industries
when it is expanding nursing
services in such a way as to
complement these other
143
occupations' and industries'
services. Opposition
can be expected when nursing
services expand
to compete with others'
services."
Total: 14 1 10 10
144
Table 4.4. Inducing the government to impose rent-seeking policies
Study: Rent-seeking behavior:
3a) campaign
contributions
3b)
bribes
3c) conflict-of-
interest
constructions
3d)
Regulatory
capture
3e)
Revolving
door
3f) Pressure
groups
3g) political
power
1.
Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
“If consumers
routinely seek
out alternative
medicine as a
substitute for
conventional
physician
services, rather
than as a
complement,
then an
increase in the
number of
alternative
medicine
practitioners
would be
expected to
erode
physicians’
incomes.
Physicians
would
therefore have
an incentive to
lobby state
regulatory
authorities to
enact policies
to restrict
the incursion of
alternative
medicine.”
2. Andrews
(1986)
3. Baer
(1989)
"Given its
professional
dominance, the
relationship
between
biomedicine and
alternative
medical systems
has been
characterized by
processes of
annihilation,
restriction,
absorption, and
even
collaboration.
However,
since certain
stragetic elites
ultimately shape
health policy, the
145
power of
biomedicine over
competing”
4. Chu
(2008)
"The $200-
billion industry
not only has
access to the
government’s
decisionmaking
process,6 but it
is indeed so
politically
influential that
‘‘PhRMA [the
Pharmaceutical
Research and
Manufacturers
of America],
this lobby, has
a
death grip on
Congress,’’ in
the words of
Senator
Richard J.
Durbin (Pear,
2003). This
political
influence
potentially
comes from the
impressive
amount
of the
industry’s
lobbying
expenditures
and campaign
contributions.
For
example, the
industry’s total
expenditure on
lobbying from
1998 to 2006
was
$1,087 million,
and total
campaign
contributions
were $139
million during
the election
cycles from
1990 to 2006.7
In fact, given
the nature of
the industry,
it is easy to
understand that
it is in the drug
companies’
146
best interest
to have access
to the policy-
makers, who
can easily
return favors at
low
political costs."
5. Cimasi
(2008)
“The American
College of
Radiology
(ACR) recently
announced
plans to lobby
for legislation
requiring
Medicare to
define
standards for
physicians
performing
diagnostic
imaging”
"The
American
College of
Radiology
(ACR)
recently
announced
plans to
lobby for
legislation
requiring
Medicare to
define
standards for
physicians
performing
diagnostic
imaging. At
a December
2004
meeting,
MedPAC
staff
members
stated, ‘‘It’s
important for
CMS to set
national
standards for
each imaging
modality’’.
Med-
PAC
endorsed
relying upon
private
accreditation
agencies to
develop the
standards.
Private
accreditation
agencies
would most
likely be
organizations
such as the
ACR, which
currently
accredits
radiology
departments.
ACR facility
accreditation
147
for a specific
imaging
modality
requires that
physicians
who interpret
diagnostic
imaging
studies
meet ACR
qualifications
for that
modality"
“Other
studies have
been
conducted by
the
government,
sometimes at
the
prompting
and lobbying
of general
hospitals and
groups such
as the AHA.
Thus, even
studies
conducted by
the
government
that seem to
be impartial
may be
influenced
through the
lobbying by
general
hospital
groups in
conjunction
with the
government’s
own financial
interests and
motives.
In response
to the highly
suspect
earlier
studies.”
6. Cohen &
Juszczak
(1997)
7. Cramer,
Dewulf &
Voordijk
(2013)
8. de Voe
& Short
“When
Medibank
148
(2003) health
insurance
proposals were
presented in
Australia,
political
struggles
erupted.
Government
leaders in
Australia faced
fierce
opposition
from key
players within
the health
policy arena.
Prior to this
turning point,
one of the key
health policy
players—the
Australian
Medical
Association
(AMA)—had
developed a
corporate
partnership
with the non-
Labor
government.
When the
Medibank
proposal
emerged,
power
structures in
the health
policy arena
were re-
aligned. The
political role
of the AMA
shifted from a
corporate
partner to a
pressure
group.”
9.
Dickerson
&
Cambpbell-
Heider
(1994)
“Physicians
advocated
having the
Committee
on Allied Health
Education
Accreditation
(CAHEA), an
arm of medical
boards,
credential RCTs.
This situation
side-steps the
149
government’s
role in licensure
and
demonstrates the
assumed power
of the AMA
lobby.”
“The AMA
assumed that its
economic
and political
dominance was
sufficient
to spawn a new
role and
determine the
RCT scope of
practice of these
workers.
Despite
opposition from
over 100 nursing
and consumer
groups, and even
two medical
societies,” the
AMA forged
ahead to set up a
pilot project for
the RCT role at
Parkway
Medical Center
in Kentucky.12
This action
accentuates
physicians’
assumptions that
they are
powerful enough
to control all
aspects of health
care.”
10.
Gravelle
(1985)
“Professional
associations
are the devices
through which
individual
members seek
to influence
legislators and
regulators.”
“Professional
associations are
the devices
through which
individual
members seek to
influence
legislators and
regulators.”
11. Gualda,
Narchi &
de Campos
(2013)
“It is
important to
recognise that
the Labor and
Health
Ministries
experience
direct and
constant
pressures from
“In spite of
obstacles,
midwives
continue trying
to claim their
social
space,seeking to
maintain and
strengthen the
profession.
150
medical and
nursing
organisations”
They seek
effective
insertion in the
job market,
support from
entities of civil
society,
representatives
of judicial and
political
power, and from
the movements
organised for
improvement and
change in the
birth care model
in Brazil.”
12.
Gunderman
&
Tawadros
(2007)
“Some
radiologists
believe that
such standards
should be
enacted in
other fields of
imaging. The
ACR currently
recommends to
Congress
that clinical
images produced
during CT, MRI,
or PET studies
performed at a
facility must
be formally
interpreted by a
qualified
interpreting
physician, who is
a radiologist or
other licensed
physician who
meets the
appropriate
education,
training, and
experience
requirements
established by
the Secretary
in consultation
with accrediting
organizations.
The executive
director of the
Medicare
Payment
Advisory
Commission,
citing similar
rationale,
advocates a
151
similar
approach:
The Congress
should grant the
Secretary
[of the US
Department of
Health and
Human
Services]
authority to
develop
standards
. . . . [The
Centers for
Medicare and
Medicaid
Services] should
strongly consider
setting standards
for at least the
following
areas: . . .
qualifications
and
responsibilities
of the
supervising
physician . . .
and the
professional
training,
experience,
and education of
the physicians
who interpret
studies.
Practically
speaking, such
initiatives
would erect
barriers to
physicians
who might wish
to play a
larger role in
diagnostic
imaging.”
13. Kelner ,
Wellman,
Boon &
Welsh
(2013)
“A widely used
model is
Pross’s (1986)
theory of
pressure
groups which
helps to
explain how
players
participate in
the policy
process. He
argues that in
order to be
“Dominant
structural
interests contain
the professional
monopolizers
who are served
by the structure
of existing social,
economic and
political
institutions”
152
effective,
groups should
be organized,
persistent,
have an
extensive
knowledge of
substantive
issues and
policy
processes,
have financial
resources, and
a stable
membership.
While there
can be
variations in
interest
between the
members of a
stakeholder
group (Wolfe
& Puttler,
2002), it is safe
to assume that
the established
medical
professions
exhibit all of
the
characteristics
required to be
an effective
pressure
group.”
14. Krauss,
Ratner &
Sales
(1997)
“Government
regulation
can be
cumbersome,
inept,
and can be
manipulated
by the
industry
effectively to
provide even
greater
power than
that which a
private
organization
may yield”
15. Landers
& Seghal
(2004)
"Health care
lobbying
expenditures
totaled $237
million
in 2000. Health
care lobbying
expenditures
accounted for
“Although policy
decisions are
influenced by
many factors,
our findings may
indicate a limited
political
influence
of disease
153
15% of all
federal
lobbying and
were larger
than the
expenditures of
every other
sector"
“Although
health policy
decisions are
influenced
by many factors
(e.g., political
alliances,
campaign
contributions,
research
findings), the
high lobbying
expenditures of
pharmaceutical
and health
product
companies may
indicate that
they are better
able to convey
their
perspective to
legislators. By
contrast,
disease
advocacy and
public health
organizations
spend relatively
little on
lobbying and
may have less
influence as a
result.
Physicians and
other health
professionals
also spend a
great deal on
lobbying, but
their political
influence may
decline if their
spending
growth
continues to lag
behind
that of other
organizations.”
advocacy and
public health
organization
and a declining
political
influence of
physicians and
other
health
professionals.”
16.
Landers,
Ashwini &
Sehgal
“Fourth,
physicians can
influence
health policy
“One legislative
assistant said,
"physicians
should beware of
154
(2000) decisions in
other ways,
such as holding
elected office,
writing letters,
doing policy-
relevant
research, and
making
campaign
contributions”
the impression
that their main
concern is
reimbursement
rates." Another
commented that
physicians
should "convey
passion . . . and
recognize the
power they have
to influence
Congress.”
17. Leffler
(1978)
“Organized
medicine-the
American
Medical
Assocation-using
powers delegated
by state
governments,
reduced the
output of
doctors by
making the
graduates of
some schools
ineligible to be
examined
for licensure and
by reducing the
output of schools
that continued to
produce
eligible
graduates."
18.
Moynihan
(2009)
“At around the
same time as the
JAMA article, a
Canadian
professor
published an
editorial in a
special 2008
issue of BMJ on
education and
pharmaceutical
companies,
outlining how the
‘‘entanglements’’
between medical
education and
commercial
interests were
first being
decried almost a
century ago, in a
1910 report by
Abraham
Flexner.”
“In fact a recent
155
global survey
suggested
perhaps two-
thirds of health
charities and
patient groups
received money
from drug or
device
manufacturers.”
19.
Mullinix &
Bucholtz
(2009)
“The issue of
quality of care,
clothed in the
guise of concern
for public safety,
continues
to be raised as a
political tool to
limit non-
physician
healthcare
provider
expansion."
20. Page
(2004)
"Recent
advocacy by
the American
Medical
Association
(AMA) and
others to
exempt
physicians
from antitrust
laws seeks to
make the
pursuit of
protectionism
even easier for
physicians's
organizations."
"Various
proposals for
antitrust
exemptitons
for phyiscians
have appeared
in the states,
backed by the
AMA and the
state medical
associations."
21. Reilly
& Santerre
(2013)
22.
Riemer-
Hommel
(2002)
23. Schetky
(2008)
“The
pharmaceutical
industry (PI), like
156
many for profit
businesses, is
beholden to stock
holders, and its
primary interest
is making money.
In contrast
to the practice of
medicine, there is
no fiduciary duty
to the patients
that it serves. At
the interface
between these
two different
worlds is the
physician, who
determines what
medications to
prescribe to
which patients
and in what
dosage. For
years, the
intermediary was
the ‘‘detailman,’’
also known as
the ‘‘drug rep’’
or, more
recently, as a
pharmaceutical
representative
(PR). The PI’s
sphere of
influence has
expanded beyond
one-on-one
contact with
physicians to
direct advertising
to patients,
underwriting
continuing
medical
education (CME)
programs,
sponsoring
educational
speakers, lavish
drug displays at
conventions, free
gifts, and
research and
consulting
relationships.”
24. van den
Bergh &
Faure
(1991)
“Physicians
and
pharmacists
enjoy a well-
protected
monopoly.
The
“As far as the
extent of the
monopoly rights
is concerned, the
Minister cannot
act against the
dominant
157
definition of
medical
services is
strongly
monitored by
the
physicians
themselves.”
“This self-
regulation
restricts
entry into the
profession”
opinion of the
highest
representatives
of the medical
profession (the
Royal Academies
of Medicine and
the university
faculties).
According to the
literal text of the
law, in case of
negative advice
the Minister must
withdraw his
proposition or
formulate a new
one.”
“The groups
most successful
in obtaining
wealth transfers
are likely to be
small,
single-issue
oriented, and
well organized.
The suppliers of
the rents are
large groups in
the general
public, which are
difficult to
organize and
which face
information
problems. Under
these conditions
wealth transfers
take place from
the public as a
whole to well-
organized
interest groups.
Politicians can
be seen as the
brokers of this
wealth transfer.”
25. White
J. (2013)
“The
substantial part
of the health
economy that
may be owned
by government,
or at least
formally
nonprofit, will
be less able to
influence
through
methods like
“The details of a
case study may
suggest that, as
in a study of
Sweden, “the
physicians’
union was
clearly one of the
winners”; yet
Swedish health
care spending as
a share of GDP
fell dramatically
158
campaign
contributions
that are
available to
other provider
interests, such
as military
contractors.”
in spite of the
physicians’
supposed power.
Political
authorities may
manage to set up
the budgeting
dynamic so that
physicians or
other groups
turn on each
other –
“shooting
inward as the
circle closes”.
Hence providers
in general, and
physicians in
particular,
exercise unusual
power over
health care
policy less
through
deploying
standard
political
resources
(money, votes)
than through
their influence
on policy
implementation.”
26. White
W.D.
(1987)
"It would
obviously be
desirable to
have direct
measures of
political action
taken by groups
in support or
opposition to
laws, such as
lobbying
expenditures,
hours of effort
by volunteers,
etc. These data
could be used
both to examine
the efficacy of
various types of
political action
and to evaluate
the role
of economic
conditions and
political
variables in
determining the
level of support
or opposition.
"Two general
patterns in
the
introduction
of regulation
are described
in the
literature:
First, what
Stigler
(1971) calls
the
"acquired"
model, in
which private
interest
groups seek
regulation
for their own
benefit:
Second, what
is often
called the
"public
interest"
model in
which the
general
public, or
"If there are
economies of
scale in taking
political action,
members of
groups
in which gains or
losses from
regulation are
relatively
concentrated and
which
are already
organized for
other purposes
(for example
through trade or
professional
associations) are
likely to have
lower action
costs and to take
more political
action, other
things equal,
than members of
groups in which
effects are
diffused and
159
In the absence
of such data,
we are left to
try to infer the
possible levels
of support and
opposition by
various groups
from economic
and political
variables which
may affect the
anticipated
gains or losses
of
groups and
their costs of
political action.
This type of
approach is
necessarily
rather crude,
but it may still
yield
interesting
results."
their
agents, seek
regulation
for the
benefit of
society at
large."
"To the
extent that
groups with
concentrated
interests like
occupations
have
lower costs
of action, the
economic
theory of
regulation
predicts the
"acquired"
model will be
more
important in
explaining
the
introduction
of laws
than the
"public
interest"
model.”
which are not
organized for
other purposes."
27. Young
(1985)
Total: 7 0 2 4 0 5 13