Market distortions in the Dutch mixed long-term care market: an exploratory analysis

Mixed markets can enhance welfare compared to full public or private provision. However, this welfare gain depends on the extent to which market distortions exist. Recent literature demonstrates distortions in mixed long-term care markets worldwide. Our study explores potential distortions in the Dutch institutional market. While all Dutch residential nursing homes are non-profit, for-profit organisations, including private equity (PE) firms, have increasingly entered the market, offering round-the-clock care provided in home-like settings as an alternative to non-profit residential care.We analysed claims data from 2017-2021 for dementia patients aged 70 and older using multinomial logit and Cox Proportional Hazards models. Specifically, we compared risk selection, upgrading, and care quality (measured by avoidable hospitalisations and mortality) between for-profit and non-profit providers.Our findings do not suggest increased risk selection, higher upgrading, or lower care quality by for-profit (PE-owned) providers compared to non-profit providers. Consequently, we did not find evidence of strong market distortions in the Dutch institutional long-term care market. These results contrast with the existing international literature, suggesting that adverse incentives in the Netherlands may be influenced more by the way care is provided (in home-like settings versus in residential nursing homes) and financing structures rather than ownership type alone.