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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.

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Page 1: 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.

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“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).

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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.

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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

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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

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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

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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.

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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

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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.

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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.

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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.

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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.

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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?

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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.

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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

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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.

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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.

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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

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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

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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.

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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.

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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).

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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

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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.

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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.

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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

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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.

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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.

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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

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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.

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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

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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

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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.

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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

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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

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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

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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

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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

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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

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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.

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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)

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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

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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

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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:

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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.

Page 46: Thesis Arrindell abridged

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

Page 47: Thesis Arrindell abridged

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

Page 48: Thesis Arrindell abridged

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

Page 49: Thesis Arrindell abridged

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.

Page 50: Thesis Arrindell abridged

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

Page 51: Thesis Arrindell abridged

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

Page 52: Thesis Arrindell abridged

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.”

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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.

Page 54: Thesis Arrindell abridged

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)

Page 55: Thesis Arrindell abridged

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

Page 56: Thesis Arrindell abridged

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.”

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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.

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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

Page 59: Thesis Arrindell abridged

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

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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).

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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

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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.

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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

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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.

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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.

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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.

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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.

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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.

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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).

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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’.

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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

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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.

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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.

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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.

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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.

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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.”

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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.”

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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”

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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.”

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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.”

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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."

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7. Law that restricts market entry

Total production output restrictions in Curaҫao.

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Parliamentary debate accompanying the law:

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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”

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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.”

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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.”

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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.

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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.)”

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Source: www.caribischnetwerk.ntr.

*See next page*

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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."

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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.”

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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.”

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94

16. Goodwill as an entry barrier

Goodwill as a monopoly strategy amongst medical specialist in the Dutch Kingdom.

Source: Coopers & Lybrand (1994)

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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,’’

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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.”

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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.”

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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.”

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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

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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.

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101

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102

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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 ,,

Page 111: Thesis Arrindell abridged

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

Page 112: Thesis Arrindell abridged

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 ,,

Page 113: Thesis Arrindell abridged

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 ,,

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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. &

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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.

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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.

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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):

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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

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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

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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

Page 120: Thesis Arrindell abridged

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

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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

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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 . .

Page 123: Thesis Arrindell abridged

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

Page 124: Thesis Arrindell abridged

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)

Page 125: Thesis Arrindell abridged

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

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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

Page 127: Thesis Arrindell abridged

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.”

Page 128: Thesis Arrindell abridged

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

Page 129: Thesis Arrindell abridged

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,”

Page 130: Thesis Arrindell abridged

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

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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

Page 132: Thesis Arrindell abridged

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

Page 133: Thesis Arrindell abridged

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

Page 134: Thesis Arrindell abridged

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

Page 135: Thesis Arrindell abridged

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

Page 136: Thesis Arrindell abridged

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

Page 137: Thesis Arrindell abridged

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

Page 138: Thesis Arrindell abridged

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)

Page 139: Thesis Arrindell abridged

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

Page 140: Thesis Arrindell abridged

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

Page 141: Thesis Arrindell abridged

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)

Page 142: Thesis Arrindell abridged

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

Page 143: Thesis Arrindell abridged

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

Page 144: Thesis Arrindell abridged

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.”

Page 145: Thesis Arrindell abridged

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

Page 146: Thesis Arrindell abridged

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

Page 147: Thesis Arrindell abridged

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

Page 148: Thesis Arrindell abridged

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.”

Page 149: Thesis Arrindell abridged

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

Page 150: Thesis Arrindell abridged

143

occupations' and industries'

services. Opposition

can be expected when nursing

services expand

to compete with others'

services."

Total: 14 1 10 10

Page 151: Thesis Arrindell abridged

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

Page 152: Thesis Arrindell abridged

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’

Page 153: Thesis Arrindell abridged

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

Page 154: Thesis Arrindell abridged

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

Page 155: Thesis Arrindell abridged

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

Page 156: Thesis Arrindell abridged

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.

Page 157: Thesis Arrindell abridged

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

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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”

Page 159: Thesis Arrindell abridged

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

Page 160: Thesis Arrindell abridged

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

Page 161: Thesis Arrindell abridged

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

Page 162: Thesis Arrindell abridged

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

Page 163: Thesis Arrindell abridged

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

Page 164: Thesis Arrindell abridged

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

Page 165: Thesis Arrindell abridged

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

Page 166: Thesis Arrindell abridged

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