Competitive effect in Czech hospitals: New evidence

Increasing transparency of public tenders is a crucial point on the way to reduction of public expenditure in all sectors of public finance. The objective of our paper is to verify whether the general trends in public tenders in industry are valid for the public procurement in Czech hospitals or whether a specific position of healthcare (and thus hospitals) affects the public procurement sector.

The evidence for the last decade implies that 1) more transparent and 2) more open public tender procedures allow for significant decrease in the final price. The biggest savings were registered in service procurements where the final price equals 85% of the original price both in general and faculty hospitals. On the opposite side the rise in prices was registered in construction procurement (increase of 8% in all hospitals and 16% in faculty hospitals).

In our paper we focus on the competition effects as a factor of tender procedures which remained out of concern in the Czech Republic. We run the set of regressions to verify the previous results on the more subtle basis. We control the behavior for set of variables as spatial effect, effect of contract value, type of hospital and type of founder and finally for number of contractors as a measure of competition.

Data was obtained from publicly available databases which are mandatorily created under the Czech procurement law. From the total amount of more than 4000 observations almost 2000! were eliminated due to their incompleteness or lack of verification/quality. The final amount of public tenders which were analyzed in data sample was 40,000 mil CZK, between 2006 and 2011.

Results are only partly in accordance with the previous assumptions and theory. It seems the competitive effect is significant for supply contracts, but diminishing after 4-5 competitors, but is not significant for other types of tenders (buildings, services). The specific position of healthcare seems to be a relevant factor which shapes the behavior of the healthcare procurements market participants.