Measuring Active Purchasing in Healthcare: Analysing Reallocations of Funds Between Providers to Evaluate Purchasing Systems Performance in the Netherlands

Document Type : Original Article


1 Scientific Institute for Quality of Healthcare (IQ Healthcare), Radboud University Medical Center, Nijmegen, The Netherlands

2 School of Business and Economics, Vrije Universiteit, Amsterdam, The Netherlands

3 Department of Health Services Research, School for Public Health and Primary Care (Caphri), Faculty of Health, Medicine and Life Sciences, Maastricht University, Maastricht, The Netherlands


Purchasing systems aim to improve resource allocation in healthcare markets. The Netherlands is characterized by four different purchasing systems: managed competition in the hospital market, a non-competitive single payer system for long-term care (LTC), municipal procurement for home care and social services, and selfprocurement via personal budgets. We hypothesize that managed competition and competitive payer reforms boost reallocations of provider market share by means of active purchasing, ie, redistributing funds from high-quality providers to low-quality providers.

We define a Market Activity Index (MAI) as the sum of funds reallocated between providers annually. Provider expenditures are extracted from provider financial statements between 2006 and 2019. We compare MAI in six healthcare sectors under four different purchasing systems, adjusting for reforms, and market entry/exit. Next, we perform in-depth analyses on the hospital market. Using multivariate linear regressions, we relate reallocations to selective contracting, provider quality, and market characteristics.

No difference was found between reallocations in the hospital care market under managed competition and the non-competitive single payer LTC (MAI between 2% and 3%), while MAI was markedly higher under procurement by municipalities and personal budget holders (between 5% and 15%). While competitive reforms temporarily increased MAI, no structural effects were found. Relatively low hospital MAI could not be explained by market characteristics. Furthermore, the extent of selective contracting or hospital quality differences had no significant effects on reallocations of funds.

Dutch managed competition and competitive purchaser reforms had no discernible effect on reallocations of funds between providers. This casts doubt on the mechanisms advocated by managed competition and active purchasing to improve allocative efficiency.


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Articles in Press, Corrected Proof
Available Online from 02 September 2023
  • Receive Date: 01 July 2022
  • Revise Date: 17 August 2023
  • Accept Date: 30 August 2023
  • First Publish Date: 02 September 2023