Thesis Arrindell abridged

Rent-seeking in healthcare; an
explorative literature review
Master Thesis
Dennis Arrindell
i6009443
Maastricht University, Master Healthcare Policy, Innovation and Management
Supervisors: Aggie Paulus, Phd. & Arno van Raak, Phd.
Supervisor placement institution: drs. Francois Simon
Maastricht. July 5, 2014.

“The monopoly privileges and restrictions of the professions are created by legislation and thus
any complete theory of professionalization must include an account of the workings of the
political market. This is notably absent from the writings of those who believe the professions act
in the public interest in restricting and regulating supply” – Gravelle (1985).
“If a savvy observer can accurately predict our [radiologists] position on every issue strictly on
the basis of a consideration of our own economic interests, then we are subject to Bernard
Shaw’s scathing indictment of professions as “conspiracies against the laity.” – Gunderman &
Tawadros (2007).

Acknowledgement: I would like to extend my gratitude to my thesis supervisor, Aggie Paulus
Phd., who provided guidance and greatly assisted me in giving shape to embryonic ideas and
rudimentary conjectures in order to transform these into a structured research. In addition, I
would like to extend my gratitude to the deputy-director of the social insurance bank in Curaçao,
Francois Simon drs., who functioned as my placement supervisor and greatly expanded my
knowledge on the art of expedient health purchasing.

Table of Contents
1. Introduction ..............................................................................................................................................1
1.1. Introduction .......................................................................................................................................1
1.2.1. Background .....................................................................................................................................1
1.2.2. Societal relevancy ...........................................................................................................................3
1.2.3. Scientific relevancy .........................................................................................................................3
1.2.4. Practical relevancy ..........................................................................................................................4
1.3.1. Goal.................................................................................................................................................6
1.3.2. Problem statement.........................................................................................................................6
1.3.3. Research questions.........................................................................................................................7
1.3.4. Clarification of research questions .................................................................................................7
1.3.5. Definition of key concepts ..............................................................................................................7
1.4. Chapter division .................................................................................................................................9
2. Theoretical framework and model .........................................................................................................10
2.1. Introduction .....................................................................................................................................10
2.2. Public choice theory.........................................................................................................................10
2.3. Rent-seeking dissected ....................................................................................................................10
2.4. Capturing income transfers in healthcare .......................................................................................12
2.5. Restricting total production output in healthcare...........................................................................14
2.6. Inducing the government to impose production output restrictions in healthcare........................16
2.7. Theoretical model............................................................................................................................18
3. Methodological framework ....................................................................................................................19
3.1. Introduction .....................................................................................................................................19
3.2. Research type/design.......................................................................................................................19
3.3. Data collection .................................................................................................................................19
Figure 3.1. Methodological steps:...........................................................................................................22
3.4. Data analysis ....................................................................................................................................22
3.4.1. Data analysis research question 1 ................................................................................................22

3.4.6. 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
5. Conclusion, Discussion and Recommendations......................................................................................59
5.1. Introduction .....................................................................................................................................59
5.2. Conclusion........................................................................................................................................59
5.3. Discussion.........................................................................................................................................63
References: .............................................................................................................................................68
Documents participatory study ..................................................................................................................73
1. Letters from two hospitals..................................................................................................................74
2. Letter from gynecologist association..................................................................................................75
3. Turf conflict midwifery-gynecologist ..................................................................................................76
4. Parliamentary discussion#1 ................................................................................................................77
5. A plight for stricter regulation ............................................................................................................78
6. Parliamentary discussion #2 ...............................................................................................................80
7. Law that restricts market entry ..........................................................................................................81
8. Arbitrary entrance criteria ..................................................................................................................83
9. Letter from physician association.......................................................................................................84
10. Control over accreditation................................................................................................................85
11. Demanding economic credentialing ................................................................................................87

12. Denying hospital privileges ...............................................................................................................88
13. Price-fixing amongst pharmaceutical importers...............................................................................91
14. Prohibiting expedient division of labor.............................................................................................92
15 .Certificate of need laws ....................................................................................................................93
16. Goodwill as an entry barrier .............................................................................................................94
17. Economic and political integration by pharmaceutical wholesalers ................................................95
18. Request for legal advice for physician association ...........................................................................96
19. Legal response to physician association ...........................................................................................97
20. Control over market entry through accreditation............................................................................98
21. Creating demand for the treatment of broad social conditions.......................................................99
Appendix 1: Search results per database per keyword: .......................................................................103
Appendix 2: Possibly relevant articles: 82 (27 upon application of inclusion form).............................107
Appendix 3: Table inclusion form .........................................................................................................112
Appendix 4: Thick data matrix ..............................................................................................................114

Abstract
Background: Public choice theory as an explanatory model for healthcare policy is not an area
that receives a lot of attention in healthcare policy literature. Public choice theory can be used to
understand and predict what government policies economic actors will endorse or obstruct.
Aim: This study uses the concept of ‘rent-seeking’ used in public choice theory to test if and to
what extent rent-seeking behavior is manifested in healthcare policy. This is done by means of an
explorative literature research further substantiated by anecdotal evidence obtained through a
participatory study at a social insurance bank tasked with purchasing health output.
Methods: An explorative literature research was conducted to gather information on rent-
seeking in healthcare. Using a pre-defined search protocol tailored to jargon used in public
choice theory and consulting two separate academic databases; Science Direct (Elsevier) and
EBSCO host. Hits were screened and assessed using an inclusion form.
Results: 27 articles were eventually included for analysis. These articles provided relevant
information on the practice of rent-seeking in healthcare policy. Together, the included articles
indicated how income transfers are captured in the context of healthcare, how total industry
supply is restricted to create higher incomes for incumbent suppliers and finally, how
governments are induced to grant political awards to rent-seeking agents in the context of
healthcare policy.
Conclusion and discussion: The findings suggest that healthcare policy in western countries is
host to a variety of rent-seeking activity, manifested by legal and tacit restrictions on external
and internal competition to create economic rent for incumbent suppliers. These restrictions limit
market entry by new entrants and prohibit competition between members of allied professional
guilds. For incumbent suppliers of healthcare services and commodities, these cartel practices
raise their income without having to deliver any significant reciprocal value. The findings
suggest that western healthcare policy is to a great extent geared to safeguard the interest of the
medical community of interest at the expense of the general public, something in accordance
with public choice theory.

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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.

5
Simon, who at the time of this writing functions as the deputy director of the social insurance
bank in Curaҫao responsible for 90% of total health purchase on the island.

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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.

8
Community of interest: a conglomerate of actors with similar industrial interests and stakes. In
the context of this thesis this term refers to a conglomerate of cartels between allied industries,
for example when the rubber producer industry, the tire manufacturer industry and the
automobile industry together engage in price-fixing and lobbying for subsidies.
Economic rent: Rent refers to that fraction of the price which is not related to any economic
activity or value. A frequently highlighted example is when a concentrated group of taxi drivers
can charge seven dollars instead of five dollars per ride thanks the elimination of competition
due to licensure. The extra two dollars obtained per ride thanks to the monopoly is called
‘economic rent’. Welfare is reduced as resources are being misallocated in the form of
‘economic rents’ through monopoly pricing without any reciprocal economic gain (Tollison,
2012).
Income transfer: wealth that has been generated through productive economic activity that is
being redistributed to rent-seeking actors without receiving anything in return. For example
when customers pay fixed tariffs for consumption goods and are paying prices beyond the true
market value of that good. Thus, a portion of their economic surplus is directed to a rent-seeking
agent who has managed to capture an income transfer through manipulation of regulation
(tariffs) (Tollison, 2012).
Lobbying: to try to persuade a politician, the government, or an official group that a particular
thing should or should not happen, or that a law should be changed (Cambridge dictionary,
2014).
Production output restriction: government mandated policy and/or legislation which limits the
production of a good or a service. Established market players frequently lobby the government to
impose production output restrictions on the industry under the pretext that if free production is
allowed, the market will ‘saturate’. In economic reality, production output restrictions benefits
the established market players as they can more easily control the total supply and thus operate
as a cartel and introduce monopoly prices. ‘Protectionism’ is an example of a production output
restriction (Tollison, 2012).
Public choice theory: Buchanan & Tullock (1962) pioneered the public choice theory which
provides an economic rationale behind the endorsement of specific policies by special interest
groups. In public choice theory, government intervention is frequently perceived as a tool by
which special interest groups can create new sources of rent by manipulating regulation
(Tollisen, 2012). In this study, rent-seeking relates to this specific activity and not the social
costs of the resources spent on obtaining the source of rent.
Rent-seeking: “The expenditure of resources in order to bring about an uncompensated transfer
of goods or services from another person or persons to one's self as the result of a “favorable”
decision on some public policy. The term seems to have been coined (or at least popularized in
contemporary political economy) by the economist Gordon Tullock. Examples of rent-seeking

9
behavior would include all of the various ways by which individuals or groups lobby government
for taxing, spending and regulatory policies that confer financial benefits or other special
advantages upon them at the expense of the taxpayers or of consumers or of other groups or
individuals with which the beneficiaries may be in economic competition.”(A Glossary of
Political Economy Terms, 2005).
1.4. Chapter division
The first chapter of this thesis introduces the background of the issue to be studied and highlights
its societal relevancy. The second chapter elaborates on the theoretical assumptions that guide
this study in combination with complementary anecdotal evidence obtained from the
participatory study. The third chapter describes the method by which the explorative literature
review is conducted and the measures undertaken to ensure a high degree of validity and
reliability. The fourth chapter presents the results and the processed data of the explorative
literature review. Finally, a conclusion is formed based on the data analysis undertaken.

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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

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
Rent-seeking agents aim to capture income transfers. This concept is restricted to public choice
theory and frequently ignored in healthcare policy literature. For example: whilst publications by
the frequently cited American Medical Association point out that licensure exists to protect the
public (Chaudry et al, 2010), in rent-seeking literature licensure is interpreted as a means by
which incumbent suppliers restrict market entry in order to generate economic rent (Tollison,
2012). The purpose of this section is to briefly outline market strategies which are known in
public choice literature to advance rent-seeking agendas and to briefly explain the economic
effects that underpin special interest group support for economically inefficient policies.
For the theoretical part, it is hypothesized that income transfers in healthcare are captured by the
following means:
1) Creating a de facto monopoly by introducing production output restrictions through
occupational licensure in order to achieve monopoly pricing (Leffler, 1978).
2) Suppliers lobbying to incorporate their particular medical commodities and services in
collectively financed remuneration schemes (Hamowy 2007) or public health efforts

13
(Tollison & Wagner, 1989), which for the purpose of this study is coined as: ‘an attempt
to capture an income transfer/subsidy’. Especially amongst paramedics, whose services
frequently fluctuate in and out of reimbursement schemes, the lobbying efforts to capture
a transfer/subsidy can be clearly observed. In healthcare policy literature, the discussion
on which medical services and commodities should be collectively financed is commonly
labeled as ‘priority setting’.
3) Zhou (1995) highlights that rent-seeking actors typically lobby for tariff legislation in
order to avoid pricing wars that may induce some providers to price their products below
the prevailing price.
4) Legislation that obstructs insurers to engage in selective contracting and thereby
facilitates licensed healthcare providers in capturing and securing an economic
transfer/subsidy all the while reducing the bargaining power for third party payers.
The economic rationale behind the medical community of interest’s support for legislation that
prohibits selective contracting is explained in textbox 1.
Textbox 1: Selective contracting
In many countries, once a professional is licensed and obtains a work permit, the third party
payer (insurer) is often legally obliged to enter a contractual agreement for the reimbursement of
the full spectrum of potential services of which the healthcare provider is authorized to perform
and cannot engage in selective contracting i.e. (partially) declining to do business with a specific
healthcare provider. The inability to (partially) decline transactions reduces the bargaining power
for the third party payer and in an economic sense, alleviates the healthcare professional from the
regular competitive pressures of a free market (=subsidy). Selective contracting allows for third
party payers to ‘cherry pick’ efficient healthcare providers or even only specific services at
particular healthcare providers and neglect the rest. Thusly, they can steer their patient
population towards more attractive deals (e.g. with discounts below tariffs) and towards more
efficient providers. The inability to engage in selective contracting consequently obstructs the
third party payer from expedient health output purchase methods (Devers, Casalino, Rudell,
Stoddard, Brewster & Lake, 2003; Johns, 1985). A prohibition on selective contracting can be
interpreted as a means to subordinate consumers (the insurers) to suppliers by significantly
reducing the bargaining power of the health output purchasers.
From a rent-seeking perspective, regulation that obstructs selective contracting can be perceived
as a ‘political award/subsidy’. For example: medical specialists A is 50% less efficient with
procedure X than the average medical specialist. Medical specialists A is still legally entitled to
perform procedure X and receive full reimbursement. Medical specialist A conducts procedure X
simply because the scope of the occupational licensure entitles all medical specialists with that
specific license to perform procedure X and be paid a tariff for it regardless of the comparative
economic efficiency of any particular agent in the pool of licensed suppliers. If prices are paid
for economic activity which yield lower output than the price paid for them (especially when
taking into account opportunity costs), it can be said that a subsidy is being transferred to the
inefficient supplier. Regulation that obstructs selective contracting thus generates income
transfers to rent-seeking agents.

14
2.5. Restricting total production output in healthcare
In order for the medical community of interest to effectively form a monopoly and capture
income transfers, restrictions on total output production are required. A production output
restriction limits the amount of suppliers in a market and thereby facilitates monopoly traits with
accompanying monopoly prices. It is also important to note that rent-seeking policies require
deception of the public as in reality, only concentrated groups reap the benefits of production
output restrictions (Tullock, 1989). Aligica & Tarko (2014) point out that rent-seeking
institutions thrive in political climates where populist rhetoric and incoherent government
intervention allows for easy justification of any type of government intervention in the market
and can thus provide an opening for opportunistic rent-seeking agents. For example, a domestic
producer of beers can choose to financially support a patriotic political movement in order to,
once that party is in power, use that party’s rhetoric in the public discourse to sponsor legislation
that introduces import restrictions for foreign beer under the pretext of nationalism. In
healthcare, ‘quality and safety’ regulations serve this purpose (Anderson, Halcoussisa, Johnston
& Lowenberga, 2000; Leffler, 1978; Paul, 1984).
For the theoretical part, it is hypothesized that production output restrictions in healthcare are
achieved primarily by the following means:
a) Lobbying for safety or environmental control promotion in order to raise operational
costs for smaller and less advanced competitors in the market place (Zhou, 1995).
b) Manipulate regulatory process to delay or obstruct issuance of licenses and/or entry to
work at a healthcare institution to prospective entrants (Zhou, 1995). Authors such as
Friedman (1962) and Hamowy (2007) claim that putting a cap on the amount of students
allowed to enroll in medical studies (numerus fixus) is the primary method by which the
American Medical Association has been able to restrict production output and raise
incomes for its members.
c) The practice of goodwill fees amongst medical specialist as barrier to entry and thus a
monopoly strategy (Coopers & Lybrand, 1994).
d) The practice of scope-of-activities monopolies (Young, 1987).
The economic rationale behind goodwill and scope-of-activities monopolies is explained in
textbox 2 & 3.

15
Textbox 2: Goodwill
Within the context of healthcare, there exists speculation that the practice of goodwill fees
amongst general practitioners and medical specialists might have little to do with goodwill fees
in the economic sense, but instead might be a pretext to create an additional barrier to entry
(Coopers & Lybrand, 1994). This observation stems from the fact that goodwill normally refers
to the successor of an asset being required to pay an extra fee to the former owner of the asset
(beyond the value of the asset) based on the asset’s ability to generate future profits. In
healthcare however, many assets are in fact externally acquired intangible skills (through
medical education) and the medical facilities and overhead used often belong to the hospital and
not to the medical specialists (Kok, Houkes, Tempelman, & Poort, 2010). Moreover, amongst
medical specialist in the Dutch Kingdom goodwill fees are not only paid when ownership is
ceded (e.g. a medical specialists who retires and demands a goodwill fee from the appointed
successor for taking over the office and client portfolio), but are also used when new specialist
join an existing partnership. New entrants to the partnership are generally required to contribute
a goodwill fee to the partnership. This is to compensate the other members of the partnership
who are compelled to cede a part of their fee-for-service based market share to the new partner.
For example, a general surgeon who is part of a four men partnership is able to gain 75.000
Euros a year in remunerations for a specific type of throat surgery. If a fifth member who is
specialized in throat surgery enters the partnership and ‘takes over’ all the remunerations
generated by the throat surgeries, the ‘missed’ income over a period of years is estimated and the
new entrant is required to compensate for this with the entrance fee which generally is upwards
of 200.000 Euros. Thus, the goodwill fee may be interpreted as a high entry fee to be allowed to
join in on an established remuneration/subsidy stream that a regional healthcare service delivery
cartel has built up throughout the years.
Textbox 3: Scope-of-activities monopolies
Medical professionals use licensing systems to ‘carve out’ pieces of the market and secure their
source of rent (Blevins, 1995). Blevins (1995) suggest that a harmful effect of medical licensure
is the scope-of-activities monopolies it artificially creates. Consequently, a wide range of
healthcare services are often delivered by overqualified personnel whereas in reality, a
significant portion of the simpler, routine task can be delegated to cheaper paraprofessionals or
medical technicians. This is clearly highlighted by the Dutch post-graduate study ‘tropic
physician’ which includes instructions for surgery in remote and rural areas. Upon return in the
Netherlands however, these same doctors are not allowed to perform these surgeries as the
market share has already been delegated through licensure. Turf disputes between midwives and
gynecologists concerning who is allowed to capture the income transfer concomitant to child
bearing are a clear example of scope-of-activities monopolies artificially produced by licensure
(Young, 1987). Multiple provider groups try to define the scope of the medical activities through
licensure regulation to fit their own income goals and capture the economic transfer. Moreover,
the non-use of paraprofessionals or medical technicians limits the scope of possibilities for
integrated care systems as licensure limits the amount of market players allowed to perform a
specific type of activity, no matter how easy it is to perform (Friedman, 1962).

16
2.6. Inducing the government to impose production output restrictions in
healthcare
Rent-sharing: economic and political integration
In rent-seeking theory, lobbying and conflict-of-interest constructions are accounted for as
resources spent in an attempt to secure the source of economic rent (Tullock, 1989). In addition
to this, Aligica & Turko (2014) in their article on crony capitalism and rent-seeking argue that
from the perspective of the rent-seeker, economic and political integration is often a prerequisite
in order to safeguard the investments in the assets, especially from future arbitrary government
intervention. The authors illustrate that the rent-seeking agent shares the source of rent with the
political agent to ensure that the political market as well as the economic market have a mutual
interest in sustaining the artificially created source of rent (e.g. employing family members of
leaders of the patriotic party in the domestic beer company). An example in the context of
healthcare is that of the swine flu scandal, whereby in 2010 it came to light that leading members
of the World Health Organization’s and government officials were in collusion with the
pharmaceutical industry with the ultimate goal to redistribute taxed wealth towards superfluous
vaccination programs and thus share in income transfers obtained (Cohen & Carter, 2010).
Similarly, Bealle (1949) and Mullins (1995) point out that the American Medical Association,
functioning as a political agent, for many years used its ‘seal of approval’ stamp to extort
advertising revenue from pharmaceutical producers to financially benefit the editors of the
Journal of the American Medical Association.
Rent-seeking also includes the costs of regulatory capture (Stigler, 1979) when the holder of a
source needs to spend resources on the regulatory authority in order to safeguard the source of
rent and to deter economic competition through regulation. In healthcare this can be observed in
the context of the ‘revolving door’ between executives of the industry and the authorities that
regulate them (Abraham, 2002) and ‘user fees’ to the Federal Drug Administration for
accelerated approval of pharmaceutical products (Angell, 2009). This is another manifestation of
economic and political integration to facilitate rent-seeking objectives.
Aligica & Turko (2014) point out that the necessity of continuously sharing rent as part of the
phenomenon of economic and political integration introduces a ‘subscription’ element to engage
in rent-seeking behavior where, to sustain a source of rent, continues costs are incurred that are,
in an economic sense, unrelated to production and distribution. Krueger (1974) suggests that the
prospective windfalls for government officials (i.e. shared rent) that can be gained from granting
political awards (e.g. granting subsidies for vaccinations) also induces competition for
employment in government positions. Extending the argument, Krueger (1974) suggests that a
part of the competition for employment in government positions can be designated as attributing
to the societal cost of rent-seeking activity. This is due to the fact that prospective government

17
officials also spend resources to obtain a government position from which economic and political
integration can take place. Government positions that can grant political awards are limited and
thus not all lobbying efforts from all prospective government officials are rewarded. This incurs
extra waste in the paradigm of rent seeking.
An explanation on the investment paradigm of a rent-seeking agent is explained in textbox 4.
Textbox 4: A numerical estimation on the investment value of lobbying expenditures:
Tullock (1989) illustrates a simple example that provides for a numerical estimation as to which
point rent-seeking institutions are willing to increase expenditures on rent-seeking through
lobbying. A domestic producer of steel, faced with competition from foreign steel can choose to
(1) invest in either upgrading their existing steel plant to compete head on with the foreign steel
or (2) invest in lobbying activity to create legislation that obstructs the import of foreign steel.
Confronted with this scenario, Tullock (1989) points out that successful lobbying will be the
preferred course of choice from a rational economic perspective as long as the expenditures on
lobbying are less than the costs of having to invest in an upgrade of the domestic steel plant.
Tullock (1989) argues that in most cases the expenditures on lobbying legislators to impose
production output restrictions as a course of action are a fraction of the expenditures that would
have to be made in the alternative course of action where competition has to be met head on.
Moreover, Tullock points out that buying the favor of legislators in such a case is relatively
cheap due to the following reason: the diffuse cost group, namely the citizen who is being
deprived of his consumer surplus by having to pay higher than necessary prices for domestic
steel, is unlikely to be aware of the conspiracy by the domestic steel producers to use import
restrictions to create a monopoly and capture concomitant income transfers. Furthermore, the
diffuse cost group contains the whole population and the costs are thus thinly spread amongst
individual members. The diffuse costs group is thus unlikely to organize as a political group and
effectively ‘counter-bid’ for political favors from the relevant legislators in order to not introduce
import restrictions.

18
2.7. Theoretical model
With the former theoretical concepts taken into account, rent-seeking activity in healthcare is
thus assumed to consist of the following three elements that require endorsement by the medical
community of interest to capture and secure economic transfers:
Table 2.1. Rent-seeking in healthcare
Rent-seeking objective: Strategic manifestation:
1. Healthcare policy regulation supported by
the medical community of interest to facilitate
the capture of income transfers.
1a) Pressuring for income transfers by e.g.
endorsing policies that create economic rent
1b) Pressuring for eligibility for reimbursement
through influencing the scope of state
mandated health insurance package (market
share is being expanded)
1c) Pressuring for subsidies for public health
interventions (WHO vaccinations scandal)
(pre-existing wealth is being redistributed)
1d) Tariffs to alleviate suppliers from
confronting effective price competition (the
prohibition on price-cutting introduces
monopoly rents for suppliers)
1e) Regulation that prohibits selective
contracting as the inability to engage in
expedient health purchase transmutes into a
subsidized income for healthcare providers.
2. Healthcare policy regulation supported by
the medical community of interest to restrict
total production output.
2a) Scope-of-activity monopolies through
occupational licensure.
2b) Goodwill fees as a barrier to entry.
2c) Manipulating the regulatory process to
delay and/or obstruct new entrants to the
market or healthcare institutions.
2d) Using environmental and safety regulations
to raise operational costs for less advanced
competitors.
3. Efforts by the medical community of interest
to induce the government to impose
restrictions on total production output.
Inducements such as:
3a) Campaign contributions.
3b) Bribes.
3c) Conflict-of-interest constructions.
3d) Regulatory capture.
3e) Revolving door between public and private
sector.
3f) Pressure groups.
3g) Political power.

19
3. Methodological framework
3.1. Introduction
This chapter describes the methodological method used to conduct this study. First the research
type and design is described. Next, the sources for data and the method of data extraction is
described, followed by the method of data analysis and a description of how an overview of the
findings will be provided. Lastly, the chapter concludes with an elaboration of the internal and
external validity of the study.
3.2. Research type/design
Polit & Beck (2008) construct research along two domains: qualitative and quantitative research.
Quantitative research relies on numerical observations and mathematical processing in the form
of statistical data to establish cause and effect relations. Qualitative research is rooted in
investigating intangible phenomena. A further classification of research designs makes a
distinction between explorative, descriptive or explanatory research (Neuman, 2006).
Explorative research ventures into areas where little is known about and aims to refine existing
assumptions. Descriptive research investigates a particular established phenomenon with
statements and figures. Explanatory research aims to evaluate cause and effect relationships and
contribute, test or challenge existing theories.
Preliminary research on the topic indicates that the amount of data available on this topic is
limited. The design of choice is a qualitative, explorative study conducted through a explorative
literature review in order to obtain an overview of the available knowledge in the literature on
rent-seeking behavior in healthcare. A Systematic literature review is designed to collect
adequate studies conducted on a domain of interest in order to gain an overview of the available
evidence on a topic (Aveyard, 2010). The method by which evidence is collected from the
literature and appraised is done in a pre-defined, systematic manner which specifies the range of
search terms, the databases employed and the selection criteria for inclusion for analysis
(Aveyard, 2010). The purpose of this study is to gain a better understanding on rent-seeking in
healthcare by means of available literature on the topic. The research ventures into undefined
areas and can thus be designated as being an explorative literature review. The parameters of the
explorative literature review are described in the next section.
3.3. Data collection
This section describes the transmutation of the concepts presented in the theoretical framework
into a fixed set of search terms (keywords). Table 2 presents an oversight of the keywords. The
explorative literature review will be performed in two data bases: ‘EBSCO host’and ‘Science
Direct’. These two databases include academic publications from multiple disciplines including
economics and healthcare. The decisive factor to opt for these two databases is attributed to the
mix of economic, healthcare and management literature that these databases contain, as opposed
to exclusively biology (e.g. Pubmed) or economy oriented databases. Upon a tentative search

20
with the keywords these databases provided relevant publications. With the exception of Google
Scholar, other sampled databases did not provide relevant findings.
Table 3.1. Concepts and corresponding keywords
Concept: Keywords:
Healthcare policy regulation supported by the
medical community of interest to facilitate the
capture of income transfers.
Public choice, rent-seeking, selective
contracting, tariffs, price fixing, floor prices,
monopoly, cartel, subsidy, anti-trust, priority
setting
Healthcare policy regulation supported by the
medical community of interest to restrict total
production output.
Public choice, rent-seeking, protectionism,
barrier-to-entry, licensure, concession,
goodwill, turf protection, turf war, turf conflict,
scope-of-activity monopoly, limit competition,
restrict competition, numerus fixus, medical
student admittance cap, market saturation
Efforts by the medical community of interest to
induce the government to impose restrictions
on total production output.
Public choice, rent-seeking, lobby, regulatory
capture, revolving door, conflict-of-interest,
financial ties, bribery, campaign contributions,
special interest group, political power, pressure
group
The following keywords are used to restrict the search results to the domain of healthcare policy:
Table 3.2. Restrictive keywords
Conjoining restrictive keywords:
Healthcare
Medical care
The results per keyword search will be sifted with by means of a rudimentary selection process.
Initially, coarse filtering criteria will be applied whereby only titles -and if necessary abstracts-
are screened to evaluate whether the search engine hits are relevant. This can be determined by
the topic and title of publications. In addition, the search engine hits are screened on whether or
not they are written from a public choice theory perspective and take into account the workings
of the political market. This constitutes the preliminarily eligible batch for inclusion in the
explorative literature review.
Next, a more refined selection process will be undertaken using an inclusion form with pre-
defined inclusion and exclusion criteria to determine which studies that turn up in the search
results are included for data analysis on rent-seeking behavior in healthcare.

21
The inclusion criteria are:
1. The topic of the publication relates to influencing policy making in healthcare. Though
rent-seeking consist out of abstract economic concepts, it is necessary for the purpose of this
study to restrict the information obtained to the context of healthcare in order to ensure that the
obtained information can be adequately interpreted within this context.
2. The publication has to contain the keywords ‘lobbying’, ‘healthcare’ or synonyms. This
is necessary to ensure that the publication takes into account the workings of the political market
(public choice) in the context of healthcare policy.
3. The study is written in English. The jargon used throughout public choice theory is derived
from English terms (e.g. economic rent). To ensure that such highly specific terms can be used to
find relevant articles that attribute similar meanings to the highly specific terms, the choice is
made to restrict the included publications to the English language.
4. The study is published in an academic journal. The articles need to be of academic origin.
This is to ensure that the articles included in the study address the topic from a scientific
perspective. The articles need to be published in a peer-reviewed scientific journal.
5. The full text of the study is available. The articles need to be read to obtain information on
rent-seeking. Not all search results in the databases provide actual access to the full articles.
Abstracts alone are not enough.
The exclusion criteria are:
1. The topic of the publication does not relate to capturing income transfers, restricting
supply or inducing government officials to enable any of the former. Publications containing
the world ‘lobbying’ and ‘healthcare’ can cover a wide variety of topics e.g. patient
organizations lobbying for more patient empowerment in the healthcare sector. The studies need
to provide insight on the political market in the context of healthcare policy and thus need to
elements from public choice theory as described in chapter 2 of this thesis.
2. The publication does not contain the keywords ‘lobbying’, ‘healthcare’ or synonyms.
3. The publication is in a language other than English.
4. The full text of the study is unavailable.

22
Figure 3.1. Methodological steps:
3.4. Data analysis
In this section, the method of data analysis for each research question is described. The research
questions are subsequently used as base to define the parameters of a data matrix that provides an
overview of the findings as deemed relevant in order to answer the research questions. The
matrix and it parameters is presented in the last part of this section.
3.4.1. Data analysis research question 1
1) What studies have been conducted that explore rent-seeking behavior in healthcare?
The first research question is attended to by means of the publications found in the two databases
after the initial keyword searches. A search protocol will be applied to record the data and
database of entry for each combination of keywords followed by a numerical recording of the
results. These results i.e. search engine ‘hits’ are all screened on titles. Consequently, the
possibly relevant publications are extracted. Next, the list of possibly relevant publications is
assessed through the abstracts using the inclusion form. In case no abstract is available or in case
the abstract does not provide closure on whether or not the publication meets the inclusion
criteria, the full text is screened for a conclusive judgment. The list of publications that are
approved by means of the pre-defined criteria in the inclusion form is also the answer to the first
research question.
1
• Search engine hits filtered on titles and topic (only titles and abstracts)
• Search engine hits filtered on whether or not the article incorporates a
public choice theory perspective and takes into account the workings of
the political market (only titles and abstracts)
2
• Inclusion criteria using the inclusion form as presented in appendix 3.
Thourhgout this part, titles, abstracts and parts of full text will be
consulted
3
• Final batch of articles that will be included in the study to gain insight
on rent-seeking in healthcare

23
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.
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.
The fourth research question considers the element of economic and political integration (rent-
sharing). The included studies, which must include the words ‘lobby’ and ‘healthcare’ or
synonyms, are screened for indications of the medical community of interest using realpolitik
leverage instruments to induce the government to enact legislation that restricts total production
output. The findings are noted down in the content matrix and subsequently presented in
readable form. In this manner, an answer is provider for research question 4.

24
5) What anecdotal evidence does there exist on the practice of rent-seeking within the context of
Curaҫao?
The fifth research question aims to provide relevant documentation from the Curaҫao healthcare
market context and to mirror this as much as possible to the theoretical framework and
corresponding keywords used throughout this thesis. The anecdotal evidence is gathered through
informal interviews and by going through archival documents and correspondence at the social
insurance bank in Curaҫao. Next, the findings are presented in a readable form together with
corresponding excerpts of original documents in the appendix. In order to identify the similarities
between the articles from the literature review and the documents from the participatory study,
relevant citations of the literature studies accompany the documents from the participatory study
where applicable. In this manner, an answer is provided for research question 5.
3.4.6. Content matrix
The research questions require included studies to be summarized and presented according to a
multiple parameters to provide an overview of the findings. Besides identifying the study, the
parameters follow the contours of the theoretical framework as laid out in chapter 2 of this thesis.
In the results chapter, the content matrix will be presented with checkmarks. In appendix 4, a
thick version of the context matrix will be presented with supporting citations from the articles in
question.
Table 3.3. Example data matrix
Study: Type of rent-seeking behavior studied:
1a) pressuring for
income transfers
1b) pressuring for
eligibility for
reimbursement
1c) pressuring for
subsidies for public
health interventions
1d) pressuring for
tariffs
1e)
obstructing
selective
contracting
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
x x
2. X et al. (2004) x
Study: Type of rent-seeking behavior:
2a) Scope-of-activity
monopoly
2b) Goodwill as a
barrier to entry
2c) Manipulating
licensing procedure
2d) Safety regulations
to increase cost for less
advanced competitors
1. Anderson,
Halcoussis, Johnston &
Lowenberg (2000)
x x x
2. X et al. (2004) x
Study: Rent-seeking behavior:
3a) campaign
contributions
3b)
bribes
3c) conflict-of-
interest
constructions
3d)
Regulatory
capture
3e)
Revolving
door
3f)
Pressure
groups
3g)
political
power
1. Anderson,
Halcoussis,
x

25
Johnston &
Lowenberg
(2000)
2. X et al.
(2004)
x x
3.5. Validity
Validity of a research method relates to whether or not the selected research tools actually
measure what they claim to measure. Neuman (2006) conceptualizes validity as consisting of
internal and external validity. Internal validity refers to absence of errors in the research design
whereas external validity relates to whether or not the findings can be generalized beyond the
studied population. Construct validity entails whether or not the instruments selected reflect the
concept that is being researched (Messick, 1995). Content validity assigns to validate whether
the instruments employed reflect all dimensions of a social construct that is being measured.
To increase validity, this explorative literature review uses a fixed set of keywords for search in
two databases. Multiple combinations of the keywords and synonyms are noted in a search
protocol and used to broaden the base of search. To further increase the validity of the research,
the included studies are narrowly defined through a fixed set of inclusion and exclusion criteria.
The construct validity is increased by ensuring that the instruments for data extraction described
in the method correspond adequately with the theory that is being tested as laid out in chapter 2.
A coherent use of public choice theory jargon is used throughout the study, in particular between
chapter two (theory) and chapter four (results). In addition to this, the data matrix duplicates the
theoretical model. Three separate data matrixes are used that reflect the theoretical underpinnings
as laid out in chapter two of this thesis and are in the sequence of research questions as laid out
in chapter one of this thesis. This serves to sustain the logical interaction between public choice
theory and observations made from healthcare policy through the included publications. The
content validity is somewhat limited; as lobbying and rent-seeking are not overt operations,
measuring the dimensions becomes subject to interpretation of the authors of the included
studies. The external validity is rather limited; the findings may not be generalizable across
varying jurisdictions or healthcare systems.
3.6. Reliability
Shipman (1997) conceptualizes reliability as the ability of the research design to produce the
same results when it is performed again at a different time or by different researchers. The
systematic approach of the literature research, the accompanying pre-defined search increases the
reliability of this study. The search results for both databases with varying combinations of
keywords will be recorded by date and with corresponding search results (number of results per
combination of keywords per database). The parameters of the data analysis is pre-defined and
reflects theoretical elements of rent-seeking theory as laid out in chapter 2. The data analysis is
also pre-defined for each research question, allowing for reproducibility of the steps undertaken
in the analysis. The reliability of this study is affected by the fact that the data gathered is
inherently dependent on the interpretation of the authors of the included articles on rent-seeking

26
behavior. Adding on to this, the results becomes subject to the interpretation bias of the
researcher of this thesis. To mitigate this risk, the explorative literature study will make use of a
thick content matrix in which observations from the included literature that corresponds with
rent-seeking theory will be noted down. Direct citations from the included articles will be
presented in this thick matrix to allow the reader to interpret the citation (appendix 4). This
reduces interpretation bias, as readers can independently verify the cohesiveness of statements
made. This systematic approach and recording of the investigations serves to ensure that this
study attains to a high level of reliability.

27
4. Results
4.1. Introduction
This chapter presents the results per research questions. The first part depicts the findings of the
explorative literature search. Subsequently, the first four research questions are answered. Lastly,
the chapter concludes with the findings of the participatory study with the anecdotal evidence
collected.
4.2. Search results
The search in databases Science Direct and EBSCO host was conducted between 20 and 28th
of
May 2014. The search in database EBSCO host was further narrowed down to sub-databases
CINAHL, EconLit & Medline as the other databases concerned domains beyond the scope of
this research. Science Direct provided 4206 hits whereas EBSCO host provided 21959 hits. A
detailed overview of the results per keyword per database can be viewed in appendix 1. Upon
publication title screening of the hits and subsequent elimination of duplicates, 82 possibly
relevant articles were extracted in total (appendix 2). The main method by which articles could
be discarded was by judging the titles and scroll over the articles that did not remotely relate to
healthcare (e.g. rent-seeking in the coal mine industry). The next filter criteria was to consider
whether the titles (or in some cases the abstracts) indicated if the article considered the
economics of the political market in the context of healthcare policy. Articles such as ‘physicians
lobbying for higher quality of care’ were also discarded as they did not include the economic
paradigm of concentrated benefit groups seeking to obtain economic rent through regulation.
Using the aforementioned coarse filtering criteria to sift through large amounts of irrelevant hits,
82 potentially relevant articles eventually surfaced in total. These titles were reviewed in more
detail, by means of reading the abstracts and if necessary, parts of- or the full text. This part of
the review made use of the inclusion criteria as presented in chapter three of this thesis. The
inclusion form can be consulted in appendix 3. Of these 82 articles, 27 (33%) were included as
they adhered to the pre-defined inclusion criteria.
Both databases provided relevant articles, though EBSCO host provided a larger amount of hits.
However, EBSCO host did also provide more irrelevant findings combined with a high amount
of articles of which the full text was not available. Moreover, EBSCO host frequently provided
newspaper clippings and editorials which, though relevant, did not meet the criteria ‘published
scientific paper’. The keywords public choice theory and rent-seeking produced only two results.
Most keywords did not provide relevant results and the majority of the relevant articles surfaced
by use of the keywords ‘licensure’, ‘turf’, ‘barrier to entry’ and ‘protectionism’. A noticeable
portion of the potentially relevant articles evolved around the turf wars between nurse
practitioners and physicians, though 19 (23%) had no full text available and were excluded for
further investigation, leaving only a few articles on this topic in the final 27 included studies.
Four articles had relevant titles and text on price-fixing in healthcare, but were newspaper

28
excerpts. The same was true for three articles concerning the drug industry. Another four articles
considered a different type of turf conflicts, in particular radiology testing privileges. These
articles, however, were news bulletins and editorials. In total, 24 (29%) articles did not meet the
criteria ‘academic publication’ Three articles included public choice jargon in the context of
healthcare, but two were encyclopedia articles and one linked to a database to which the
researcher had no access. Another three (3.7%) were not available in English. Two articles
related to goodwill fees, but did not meet the topic at hand. Some articles that included all the
keywords described only the pretext under which rent-seeking activity is undertaken, e.g. ‘a call
for stricter regulation to increase quality’ and were discarded as well since they did not consider
the production output restriction paradigm which is the focus of this research (inclusion form
criteria #1). 19 (23%) of the potentially relevant articles did not meet the topic criteria. A full
overview of inclusion form as applied to each potentially relevant article can be found in
appendix 3.
Figure 4.1. Flowchart of included articles
1:26165 hits
•4206 hits from Science Direct + 21959 hits from EBSCO host filtered on titles and
topic (only titles and abstracts)
•Search engine hits filtered on whether or not the article incorporates a public choice
theory perspective and takes into account the workings of the political market (only
titles and abstracts)
2: 82
relevant
•Throughout this part ,82 hits (appendix 2) were screened on their title, abstracts and
parts of full text using the inclusion form (appendix 3) to determine eligibility for
further analysis.
3: 27
included
•After the application of the inclusion form (appendix 3) to these 82 articles, 27 made it
to the final batch of articles that are included in the study to gain insight on rent-seeking
in healthcare

29
4.3. Results Research Question 1
What studies have been conducted that explore rent-seeking behavior in healthcare?
The next step undertaken was to create an overview of the content of the included studies. First,
a table with the identification data and summary of the included articles is provided (table 4.1).
Table 4.1. included studies:
Study # &
Authors
Title Publication
year
Country Study type Topic
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
Regulatory barriers
to entry in the
healthcare industry:
the case of
alternative medicine
2000 U.S.A. Empirical
testing
Cross-state
empirical
analysis to test if
mainstream
physicians’
incomes are
higher in states
with
more restrictive
regulations
governing the
practice of
homeopathy
2. Andrews
(1986)
Health Care
providers: the Future
Marketplace and
regulations
1986 U.S.A. Narrative
review
Expansion of
nurse’s role and
the forces that
obstruct this
3. Baer
(1989)
The American
dominative medical
system as a
reflection of social
relations in the larger
society
review
Medical
pluralism
towards a
dominative
medical system
in as a reflection
of American
Society
4. Chu
(2008)
Special Interest
Politics and
Intellectual Property
Rights: an Economic
Analysis of
Strengthening Patent
Protection in the
Pharmaceutical
Industry
2008 U.S.A. Theoretical
framework
construction
Pharmaceutical
industry
distorting patent
legislation to
create and
sustain
monopolies
through
financially
inducing
legislators
(lobbying)
5. Cimasi
(2008)
The Attack on
Ancillary Service
Providers at the
Federal and State
Level.
2008 U.S.A. Case study debate
concerning
competition for
the
technical
component
revenue streams
and the
surrounding turf
war between
physicians and
hospitals
6. Cohen & Promoting the nurse 1997 U.S.A. Discussion Discusses the

30
Juszczak
(1997)
practitioner role in
managed care
issues that
managed care
poses for nurse
practitioners
7. Cramer,
Dewulf &
Voordijk
(2013)
The barriers to
govern long-term
care innovations:
The paradoxical role
of subsidies in a
transition program
2013 The
Netherlands
Case study To explore the
barriers to
govern the
scaling-up of the
long-term care
innovations
8. de Voe &
Short (2003)
A shift in the
historical trajectory
of medical
dominance: the case
of Medibank and the
Australian doctors’
lobby
2003 Australia Case study The medical
association as a
pressure group
rather than a
corporate partner
during social
insurance reform
9. Dickerson
&
Cambpbell-
Heider
(1994)
Interpreting Political
Agendas from a
Critical Social
Theory Perspective
1994 U.S.A. Theoretical
framework
construction
Scrutinizing
policy proposals
from the
American
Medical
Association
using the Social
theory of
Habermas
10. Gravelle
(1985)
Economic analysis of
health service
professions: A
survey
1985 England Literature
survey
to provide an
introduction
for non-
economists,
especially
medical
sociologists,
to the way in
which
economists have
analyzed
professions
in the health
service
11. Gualda,
Narchi & de
Campos
(2013)
Strengthening
midwifery in Brazil:
Education, regulation
and professional
association of
midwives
2013 Brazil Case study Describes
Brazilian
midwives'
struggle to
establish their
professional field
in the arena of
maternal and
child health in
Brazil
12.
Gunderman
& Tawadros
(2007)
The Perils of
Protectionism
2007 U.S.A. Discussion
paper
Discuss the turf
conflicts
between niche
specialist and
general hospitals
concerning who
is allowed to
capture
technological
component
revenues
13. Kelner , Responses of 2004 Canada Case study Case study of

31
Wellman,
Boon &
Welsh
(2013)
established
healthcare to the
professionalization
of complementary
and alternative
medicine in Ontario
economic
conflict between
similar industries
14. Krauss,
Ratner &
Sales (1997)
The antitrust,
discrimination, and
malpractice
implications of
specialization
1997 U.S.A. Legal
consideration
Assesses the
ramifications of
psychologist
specialization
with regards to
anti-trust laws.
15. Landers
& Seghal
(2004)
How Do Physicians
Lobby Their
Members of
Congress?
2000 U.S.A. Survey Tactics of
physicians to
shape health
policy
16. Landers,
Ashwini &
Sehgal
(2000)
Health care lobbying
in the United States
2004 U.S.A. Archival study examines the
efforts of health
care
organizations
to influence
policy decisions
by lobbying
lawmakers
17. Leffler
(1978)
Physician licensure:
Competition and
monopoly in
American medicine
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
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
modeling
The relationship
between the
amount of
physicians and
economic growth
22. Riemer-
Hommel
(2002)
The changing nature
of contracts in
German health care
2002 Germany Case study Describes
various structural
changes in
contractual
relationships in

32
the German
healthcare
system
23. Schetky
(2008)
Conflicts of Interest
Between Physicians
and the
Pharmaceutical
Industry and Special
Interest Groups
2008 U.S.A. Discussion
paper
Conflicts of
Interest Between
Physicians and
the
Pharmaceutical
Industry and
Special Interest
Groups
24. van den
Bergh &
Faure (1991)
Self-regulation of the
professions in
Belgium
1991 Belgium Case study Economic
knowledge is
applied to the
self-regulation of
the Belgian
public
professional
bodies.
25. White J.
(2013)
Budget-makers and
health care systems
review
Healthcare
budgeting and
concomitant
influence of
pressure groups
26. White
W.D. (1987)
The introduction of
professional
regulation and labor
market conditions;
Occupational
licensure of
registered nurses
1987 The
Netherlands
(though
content
concerns
only U.S.A.)
Empirical
modeling
Examines the
introduction of
mandatory
licensing laws to
replace public
certification of
registered nurses
at the state level
27. Young
(1985)
The competition
approach to
understanding
occupational
autonomy *:
Expansion and
control of nursing
service
1985 U.S.A. Case study Nursing’s
acquisition of
autonomy is
examined from
the perspective
of an
occupational
interest group
competing with
other
occupational
interest groups
for a market
monopoly
General overview:
Table 4.1 indicates that of the included studies, one was published in the seventies, five in the
eighties and four in the nineties. The majority of the articles were published between 2000 and
2010 (a total of 13) and another four between 2011 and 2014. The bulk of the included articles
were published in the United States (18). Another 2 were published in the Netherlands and
another 2 in Germany. Australia, England, Canada, Brazil and Belgium each provided 1 relevant
article for inclusion. The most common study type was the case study (9), followed by the

33
narrative review (4), theoretical framework construction (3), empirical modeling (3) and
discussion paper (3). Legal consideration, survey, archival study, literature survey and empirical
testing each appeared once. 23 of the articles concerned providers (service delivery) whilst three
of the articles concerned the pharmaceutical industry (commodities) and one article concerned
the whole healthcare system. The articles varied substantially in topics and format, but did
provide in-depth understanding of the application of rent-seeking theory in healthcare. Two of
the included articles, namely Anderson, Halcoussis, Johnston & Lowenberg (2000) and Leffler
(1978), were already known to the researcher and consulted previously when constructing the
research proposal and the theoretical framework. Using the methodology and pre-defined
keywords as described in chapter three of this thesis, these two articles surfaced, passed the
screening and adhered to all the inclusion criteria and were thus also included for analysis.

34
4.4. Results Research Question 2
What do the findings of these studies indicate about healthcare policy as a potential tool for rent-
seeking agents to capture income transfers?
The included articles were analyzed using the theoretical framework described in chapter 2. For
the second research question, the findings are presented in table 4.4.1. followed by a description
of the findings.
Table 4.2. Capturing income transfers
Study: Type of rent-seeking behavior studied:
1a) pressuring for
income transfers
1b) pressuring for
eligibility for
reimbursement
1c) pressuring for
subsidies for public
health interventions
1d) pressuring for
tariffs
1e)
obstructing
selective
contracting
1. Anderson,
Halcoussis,
Johnston &
Lowenberg
(2000)
x x
2. Andrews
(1986)
3. Baer (1989) x
4. Chu (2008) x
5. Cimasi (2008) x x x
6. Cohen &
Juszczak (1997)
x
7. Cramer,
Dewulf &
Voordijk (2013)
x
8. de Voe &
Short (2003)
x
9. Dickerson &
Cambpbell-
Heider (1994)
x
10. Gravelle
(1985)
x x x x
11. Gualda,
Narchi & de
Campos (2013)
x
12. Gunderman
& Tawadros
(2007)
x x x
13. Kelner ,
Wellman, Boon
& Welsh (2013)
x
14. Krauss,
Ratner & Sales
(1997)
x
15. Landers &
Seghal (2004)
16. Landers,
Ashwini &
Sehgal (2000)
x
17. Leffler
(1978)
x
18. Moynihan
(2009)

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