Mapping Competition Profile of Healthcare Industries in Indonesia ------------------------------------------------------------------Indrianty Sudirman, Department of Management, Faculty of Economics, Hasanuddin University, Makassar,

Indonesia Abstract T e main o!"ective of t is paper is intended to mapping practices of !usiness competition of ealt care industries in Indonesia !y mapping its competition profile# T is study $as carried out at t e pu!lic and private ospital located at t ree ma"or cities in Indonesia, namely %akarta, Sura!aya and Makassar# Eac city consisted of & 'four( ospitals including t$o ')( pu!lic and t$o ')( private ospitals# T e profile of competition practices of t e ealt care industries $as measured !y five forces of competition analysis $ ic in turn affecting t e market structure of t e ealt care industries i#e#* !argaining po$er of !uyers, !argaining po$er of providers, t e availa!ility of su!stitutes, entry !arriers to ne$ entrants, as $ell as t e intensity of competition $it in industries# T e practices of !usiness competition of ealt care industries $ill reflecting t eir forces to influence ealt y !usiness competition and t e impact on societies# T e mapping of t e !usiness competition profile of t e ealt care industries $as carried out using descriptive and e+planatory analysis# T e descriptive analysis e+plained t e circumstances of eac varia!le under study as it is# , ile t e e+planatory analysis descri!ed t e impact of t e nature, relations ips and functions !et$een t e varia!les studied and t eir impact on societies and !usinesses armoni-ation# Some important researc findings can !e summari-ed as follo$s. '/( 0argaining po$er of !uyers tends to !e $eak $ ile t e !argaining po$er of providers and suppliers tends to !e strong# Ho$ever, t e !argaining po$er of t e social insurance tends to rise, especially related to control t e ealt care costs* ')( T ere are indications t at t ere as !een a price discrimination in t e community* '1( 2lt oug t e product and service su!stitution are availa!le, !ut t e asymmetry of information as led to t e malfunction of prevailing su!stitutes in e+panding t e consumer c oices* and '&( Some vertical and ori-ontal integration practices as caused !arriers for ne$comers in entering t e ealt care industries#

Key words. market structure, ealt y !usiness competition, !argain po$er, entry !arriers, su!stitution, ealt care industries I. Background Healt development is an important pillar of t e national development success# T e goal of ealt development to ac ieve t e ig est level of community ealt condition can !e ac ieved if community as t e a!ility to access t e 3uality of ealt services fairly and e3uita!ly across t e $ ole territories of t e 4epu!lic of Indonesia# To ac ieve t is o!"ective, various policies ave !een made !y t e 5overnment to encourage t e gro$t of industry and commerce in t e field of ealt care as an important entity in ac ieving t e ealt development goal# T e result $e can o!serve, among ot ers are t e rapid gro$t of ospitals, clinics, industrial medicine, and ealt insurance companies# In addition to t e government policies, a suc gro$t is also a logical conse3uence of t e increasing of t e pu!lic a$areness to protect t eir ealt as $ell as a result of increasing pu!lic demands on t e ealt care 3uality afforda!le !y all levels of society# Ho$ever, t e pro!lem of policy implementation in developing countries could !e poor implementation or t e e+istence of an implementation gap can !e vie$ed as social carpenters and masons $ o fail to !uild to specifications and t us distort t e !eautiful !lue print# T ere is often a gap !et$een policy designers and t e po$erful forces of politics and administration and implementers# T e gaps $eaken t e process# 2ny implementation gap results in t e $idening of t e distance !et$een stated policy goals and actual goals reali-ed# 2ny implementation gap may !e attri!uted to t e policy itself, t e policymakers or t e environment $it in $ ic t e policy is made and implemented# T us, in t e case of t e top-do$n approac t e pro!lem emanates from t e top and not t e ot er stake olders in t e policy implementation process# T is is t e case in most developing countries including Indonesia, $ ere t e !eneficiaries of policies are not included in t e policy formulation process 'Sakyi, )6//(# T e gro$t of t e ealt care industrial sectors can !e seen from t e emerging of many private ospitals, especially during t e last t$o years# 2ccording to t e data of 7 armacy 572, t e total num!er of ospitals in Indonesia in t e early )668 $as a!out /166 ospitals ranging from a variety classifications of government-o$ned general ospital, private ospital and special ospital# T e gro$t of t e medicine trade as also increased to 9#1: from 4p );#< trillion in

)66; to 4p )9 trillion in )66=# In )66=, t e medicine trade from t e ospital sector as $ort of 4p /< trillion > year, in $ ic t e ospital contri!uted to </: of t e total value of medicine trade in Indonesia# T e gro$t of industry and commerce in t e ealt care sector ave given a competition impact in t e ealt industry# Implementation efforts in t e sector of ealt services need to ave values of ealt y competition t at can elp to eliminate t e o!stacles to t e ealt development# Industry and trade in ealt services ave a strategic role in supporting a suc ac ievement of ealt development# In ot er $ords, t e practice of competition in t e ealt care industry s ould not arm or inder t e ac ievement of ealt development goal as $ell as damaging t e armoni-ation of t e !usiness $orld# 0ased on t e a!ove considerations, t e indicators of gro$t sectors of t e ealt care industry s ould !e correlated to t e 3uality improvement of pu!lic ealt as $ell as improving t e afforda!ility of t e 3uality of ealt care community# Ho$ever, t at scenario is still far from t e reality# It can !e seen from t e score of t e Human Development Inde+ 'HDI( $ ere in )668, Indonesia $as ranked /6= out of /=< countries# ?omparing to t e 2SE2@ countries, Indonesia $as still is at t e !ottom ranks, even !elo$ Aietnam# In addition, various surveys indicate t at t ere as !een a su!stantial amount of peopleBs complaints against t e discrimination of consumers in reac ing 3uality ealt care# 2not er fact indicating t e practices of un ealt y !usiness competition in t e ealt care industry $as t e finding of many transfer notes from one of t e largest p armaceutical company in Indonesia into undred accounts of doctors, p armacist, and ospital administrators scattered in various cities in Indonesia 'Tempo, 8 2pril )66/(# Under a suc un ealt y competition, t e development of ealt and community $ill finally !e t e victim, as $ell as t e armoni-ation of !usiness $orld# 0ased on t e a!ove p enomenon, it is t erefore very important to map t e profile of t e !usiness competition in t e ealt care industry ranging from pu!lic and private ospitals, insurances, and medicines# esearch !oals 1. 2naly-ing t e !argaining position of consumers > patients in ealt care industry in Indonesia 2. 2naly-ing t e availa!ility of su!stituted community in Indonesia ealt services for

3. 2naly-ing t e !usiness strategy of t e ealt service providers in Indonesia including ospitals, specialist doctors, p armaceutical companies, and ealt insurance companies

4. 2naly-ing t e magnitude of !arriers for !usiness actors entering t e ealt care industry in Indonesia 5. 2naly-ing t e dynamics of interaction of t e stake olders ospital ranging from patients, p ysician specialists, p armaceutical companies, and ealt insurance companies in !ot pu!lic and private ospitals# esearch benefits 1. 2s t e !asis of consideration of t e esta!lis ment of policies of ealt care industry in improving t e performance of t e ealt care !usiness sectors# 2. 7rovide input regarding t e performance of !usinesses in care sector as an evaluation of t e prevailing ealt strategic management# II. "heoretical #ramework Cne of t e ma"or approac in studying industrial organi-ation is a traditional industrial organi-ation paradigm developed !y Mason '/919, /9&9( and is colleagues and is student 0ain '/9<9(# T eir perspectives ave offered a systematic model of strategic management to assess t e !usiness competition $it in t e industry# 2ccording to t is approac , market structure of an industry $ill determine t e !e avior or conduct of t e firms t at $ill lead to determine t e performance of industry# T e structure of an industry depends on !asic conditions suc as consumer demand, demand elasticity, su!stitutes, rate of gro$t , scale of economies, met od of purc ase, scope of economies, tec nology as $ell as government policy suc as regulation, antitrust, and !arriers to entry '?arlton and 7erloff, /99&(# Market structure is formed !y various factors including t e num!er of suppliers, !uyers, economies of scale, t e degree of differentiation, t e availa!ility of su!stitutes, availa!ility of information for !uyers, cost structure, vertical integration, s$itc ing costs, !usiness scope, and so on# 0roadly speaking, o$ t e intensity of competition !et$een firms in one industry $ill !e determined !y different varia!les# Aarious varia!les $ill furt er determine $ et er an industry as a monopoly market structure, oligopoly, monopolistic or perfect competition '7orter, /986(# T e industry structure is more determined !y t e com!ined !e aviors or conducts of firms t an determined !y t e collective performances of t e firms in market place '0ain, /9;8* Mason, ealt care

/9<1(# T e performances encompass dimensions suc as allocated efficiency, tec nical efficiency, and innovativeness# 0asically, conduct is t e firms c oices of key decision varia!le suc as price, advertising, capacity and 3uality# , ile t e primary elements to identify t e industry structure are t e num!er of !uyers and sellers, !arriers to entry of ne$ firm, product differentiation, vertical integration, and diversification 'Mason, /919* /9&9* 0ain, /9<9(# T e rigorous !usiness competition faced !y t e p armaceutical industry in Indonesia and t e strong regulation of an increasingly aggressive market, as sometimes caused many firms doing un ealt y !usiness practices# T e ealt y level of !usiness competition practices carried out !y firms in t e ealt care industry is largely determined !y t e s ape of t e market structure of t e ealt care industry# T e industrial market structure and trade in t e ealt services $ill determine $ et er it is conducive or inconducive for t e firms to perform un ealt y !usiness practices# T is is particularly true since t e !usiness strategy employed !y firms $ill vary from different market structures# T e more perfect of a market structure, t e smaller opportunity for monopolistic practices# Market structure is determined !y various factors including t e num!er of suppliers, !uyers, economies of scale, t e degree of differentiation, t e availa!ility of su!stitutes, availa!ility of information for !uyers, cost structure, vertical integration, s$itc ing costs, !usiness scope, and so on# 0roadly speaking, o$ t e intensity of competition !et$een firms in one industry $ill !e determined !y different varia!les# Aarious varia!les $ill determine $ et er an industry as a monopoly market structure, oligopoly, monopolistic or imperfect competition '7orter, /996(# Furt ermore, t e market structure in an industry $ill determine t e !usiness strategy in a certain market structure $ ic t en determines t e market performance '0ain, /9;8* Mason, /9<1(# Market performance in t e ealt care industry can !e seen from t e impact on consumers and t e armoni-ation of t e !usiness $orld# In t e industry and trade of ealt services, t e level of un ealt y !usiness competition $ill directly give impact to t e consumers, especially marginal community# ?urrently, t e most common complaints found, among ot ers are t e ig prices of medicine, ig maintenance costs, and t e lo$ 3uality of ealt services# 0roadly speaking, t e intensity of competition in a variety of varia!les t at $ill determine $ et er an industry as a monopoly market structure, oligopoly, monopolistic or imperfect competition#

Furt ermore, t e strategy of t e !usiness in a particular market structure can impact on consumers and t e armoni-ation of t e corporate $orld 'Clsen, )669(# T is is due to t e !usiness strategy employed !usiness people $ill differ in different market structures# T e more perfect a market structure, t e smaller opportunity for monopolistic practices# 2ccording to 7orter '/986(, market structure is determined !y t e !argaining po$er of consumers, !argaining po$er of suppliers, t e availa!ility of su!stitutes, !arriers to entering t e industry, and t e intensity of competition $it in an industry# 2ll five of t ese varia!les $ill determine $ et er an industry as a monopoly market structure, oligopoly, monopolistic or imperfect competition# Furt ermore, t e strategy of t e !usiness in a particular market structure can impact on consumers and t e armoni-ation of t e corporate $orld# 4elated to t is done a study on t e impact of competition on consumer ealt care industry and t e armoni-ation of t e corporate $orld# ?ompared $it ot er uman needs, t e needs of ealt care as t ree main features and uni3ue t at occur at t e same time, namely. uncertainty, asymmetry of information and e+ternalities 'Evans, /98&(# 2ccording to Evans, t e t ree main traits t at lead to ealt services is very uni3ue compared to ot er products or services# T e uni3ueness t at is not o!tained in ot er commodities re3uires us to distinguis t e treatment or government intervention# /# Uncertainty Uncertainty suggests t at t e demand for medical care cannot !e sure, eit er time, place or magnitude of costs involved# ,it t is uncertainty, it is very difficult for someone to !udgeted costs to meet t e demand for ealt services# Do$ income residents $ o are not a!le to set aside part of t eir income to meet t e needs of t e unkno$n coming, even a relatively-income residents are often una!le to ade3uately meet t e ade3uacy of t e cost re3uired to meet t e medical needs# )# 2symmetry of Information T e asymmetry of information s o$s t at ealt care consumers are in a $eak position $ ile t e providers 'doctors and ot er ealt $orkers( kno$ far more a!out t e !enefits and 3uality of service itself# T ese c aracteristics are also found !y ot er ealt economists like Feldstein, %acos, 4appaport, and 7 elps, !ut a suc asymmetry of information is almost invisi!le in t e services of !eauty and rice# ?onsumers kno$ o$ muc t e market price, $ at t e !enefits are en"oyed, o$ t e 3uality of

various services and o$ muc needs# In ealt care, for e+ample, e+treme cases suc as a surgery, patients ave almost no a!ility to kno$ $ et er e or s e needs suc services or not# T is condition is often kno$n !y consumer ignorance# It is t erefore conceiva!le t at if t e provider or seller to ma+imi-e profit and as no integrity, strong religious norms and very easy to occur t e a!use of social or moral a-ard t at can !e done !y t e provider# T e nature of t is asymmetry facilitate t e emergence of supply induced demand creation t at causes t e market e3uili!rium cannot !e ac ieved in ealt care# So it is not surprised if t e increased supply of ealt care does not lo$er t e price and increases 3uality# 1# E+ternality E+ternality suggests t at t e consumption of ealt care not only affects t e !uyer !ut also non-!uyer# 2n e+ample is t e consumption of cigarettes as a !ig risk in non-smokers, as a result of t ese c aracteristics, ealt services re3uire su!sidies in various forms, for financing ealt care is t e responsi!ility of not only ourselves, !ut raised t e need for s ared responsi!ility# Uni3ue c aracteristic is also e+pressed !y some ealt economists suc as Feldstein '/991(# Furt er, 7orter '/986( concluded t at t ere are five forces t at affect competition in an industry t at is t e !uyersB !argaining po$er, !argaining po$er of suppliers, t e availa!ility of su!stitutes, and t e t reat of ne$ entrants into t e industry, and t e intensity of competition !et$een firms $it in an industry# T e intensity of competition in an industry affected !y t e fourt po$er of t e foregoing# Ho$ever, t e five forces t at affect t e profile of competition in t e ealt care industry cannot !e generali-ed into a crude model of t is study !ecause t e ealt care industry as uni3ue c aracteristics t at differ from ot er industries# T erefore, t e fift force is adapted to t e varia!le termed su!stantially different !ut still reflects t e five competitive forces e+pressed 7orter '/986( and still refers to t e !asic form of industrial-organi-ational relations paradigm '0ain, /9;8 and Mason , /9<1(# T e first varia!le to map t e profile of t e ealt care industry competition is t e !argaining po$er of consumers# In t is study, consumers focused on community ealt service users# Aaria!le !argaining po$er t ese people $ o are descri!ed !y nine parameters as follo$s. t e pattern of payments 'insurance and general( for eac

ealt service, t e pattern of costs for out of pocket patients and ealt insurance patients, t e utili-ation of ealt services !y out of pocket patients and ealt insurance patients, information for out of pocket patients and ealt insurance patients, t e pattern of selection of ealt services and medical supporting services for out of pocket patients and ealt insurance patients, t e availa!ility of su!stitute products > services for out of pocket patients and ealt insurance patients, differentiation of products > services to out of pocket patients and ealt insurance patients, comparison of medicine prices and t e cost structure of ealt services # T e second varia!le to identify t e availa!ility of su!stitution $ ic is measured !y t$o parameters. rate of su!stitution of products > services to out of pocket patients and ealt insurance patients and consumer propensity to do t e su!stitution of ealt services# Furt er parameters used to assess t e ealt care industry !arriers for ne$ entrants consist of accessi!ility to ally $it !usiness actors in t e ealt care industry and government policies# To assess t e availa!ility of su!stitutes, si+ parameters are used t at is consisting of input differentiation for out of pocket patients and ealt insurance patients, t e availa!ility of su!stitution 4S, medicine, and ealt insurance in t e ealt care industry, t e trade value in t e ealt care industry, t e influence of t e differentiation of ealt service input costs, t e integration strategy ealt care industry, partner selection strategies of ealt care !et$een ospitals $it specialist doctors, ealt insurance, and p armaceutical companies# , ile t e assessment of t e intensity of competition !et$een providers in ealt care industry portrayed t roug t e image of superior value offered !y ospitals, p armaceutical companies, medical specialists, and ealt insurance on government and private ospitals# T e lack of researc into systems and organi-ations in ealt care stands in stark contrast to t e enormous volume of researc on clinical interventions T e importance of t e social conte+t of organi-ations from t e uman services sector, suc as ealt care, is emp asi-ed !y Hemmelgarn et al# ')66;(, $ o point out t at t e organi-aional culture 'C?( and t e organi-ational climate in t ese organi-atons affect t e nature and 3uality of t e services provided# 4esearc into organi-ations and C? is $ell documented in management literature* o$ever, t e same is scarce for ealt care organi-ations# Moreover, t e researc into organi-ational culture in ealt care organi-ations in developing countries like Indonesia is very rare# 2t t e same time Indonesia as e+perienced rapid and radical economic reforms and

fast-gro$ing development, $ ic ave placed organi-ations into an intriguing conte+t E it put t e pressure on old organi-ations to c ange and provided opportunities for ne$ly founded organi-ations to implement structures and organi-ational forms to fit t e tur!ulent and dynamic environment 'Aadi and Aedina )66=(# III. esearch Methods

T is study $as carried out using a 3ualitative descriptive approac # Aarious data from individual and group intervie$s t roug purposive selection of ealt officials, $ o $ere directly involved in t e $ork of actual implementation of t e program $ere o!tained in t is study# Specifically, participants included senior management, middle management and "unior $orkers, $ o ad $orked at least for t e past t ree mont s in t e ospitals# T e units of analysis in t is study $ere pu!lic and private ospitals in Indonesia $ ic furt er analy-ed t e dynamics of interaction !et$een t e ospital and its stake olders including patients, ospitals and p armaceutical companies, ealt insurances, and p ysicians# T e study $as conducted in t ree ma"or cities in Indonesia ie %akarta, Makassar, Sura!aya# Selection of t e t ree cities $ere selected purposively !ecause t ese t ree cities are a!le to reflect on t e portrait of ealt services in Indonesia !ecause t e t ree cities are considered very eterogeneous !ot from t e aspect of economic, social, political, cultural, or religious# T e study $as conducted at t$o private ospitals and t$o government ospitals in eac city# 4espondents in t is study $ere. /# 7atient )# Hospital management 1# Managing ospitals in areas relevant to t e procurement of medicines, p ysician recruitment, legal cooperation, administration, and finance &# Medical doctors or p ysicians <# Cfficers p armacy > ospital drugstore ;# 0ig p armaceutical companies '7rinciple and distri!utors( =# Cfficers of ealt insurance T e met ods of data collection $ere as follo$s* /# )# 1# &# <# ;# In dept intervie$ using laddering tec ni3ue Focus 5roup Discussion Survey 7articipatory o!servation Document revie$ 2nalysis data using

I$.

esults and %iscussions

T e study results $ill !e presented !ased on t e follo$ing researc o!"ectives as follo$s* /# 0argaining po$er of t e user community ealt services # 7ayment pattern for t e most patients are concentrated in a different group of ealt insurance eit er social insurance or private ealt insurance and vary !et$een cities to one anot er# In general, o$ever, t ere is an increasing num!er of patients $it social insurance as $ell as t e decline in t e num!er of out of pocket patients from year to year# For t e pattern of tariffs, t ere are different rates for eac class, different treatment, different payment types, and different installations in t e same ospital# So, $it t e same input, t e more e+pensive care class s ould pay more for a suc treatment visiting fees, and medical supporting services# Similarly, eac insurance company assigned a different tariff# In some ospitals, t e rates for social insurance patienst suc as %2MFESM2S 'pu!lic ealt insurance( is even muc more e+pensive t an t e rate for out of pocket patients# From year to year t e num!er of social insurance patients is increased# Different installations in t e same ospital may also apply a different rate# For e+ample t e rate !et$een t e E4 'Emergency 4es3ue( $it inpatient and outpatient care are also given different rates for similar services and treatment# Even most ospital set different medicine prices too# Medicine prices are also different for t e patients $alk in to t e ospital $it t e patientBs ospital p armacies# T is indicates t e presence of price discrimination for t e community# ?orporate and insurance patients e+perienced some discrimination due to tied in sales# T e concentration of consumer groups t at ave t e greatest value of ealt services utili-ation $ere social insurance patients, private insurance patients, and corporate patients# T is indicates t e magnitude of t e !argaining po$er of t ese groups in determining t e type of treatment, t e $ay of treatment, and t e cost of ealt services presented to t e pu!lic# T erefore, moral integrity of t e institution is very important to guard communities from disadvantages in terms of cost, types, and t e $ay of ealt care is delivered to assured t at t e communities o!tain appropriate and profita!le services according to t eir needs# 4egarding medical information, !esides e+istence of asymmetry information !et$een ealt providers and patients,

most of t e ealt providers do not give some inform concerns to t e patients# T e patients do not ave medical tec nical kno$ledge so t at t ey do not kno$ t e types of ealt care, and medical supporting services t ey re3uired, and optional su!stituted medicines t ey may o!tain# 5enerally, patients tend to follo$ "ust $ at t e doctors recommended# 0esides ignorance, t e patient also as t e feeling of o!ligation to !uy medicine and doing medical c ecking as suggested !y t eir doctors# 2lmost all patients go along performing t e type of treatment, selecting a particular medicine !rand, and performing t e e+amination according to appointed providers# Some doctors and ospital integrated $it p armacy and medical supporting services so patients s ould c eck to t e medical supporting services and !uy medicines in a appointed place# 2t some ospitals, patients must take medication in ospital p armacies as $ell as c ecked at medical supporting services $it in t e ospital# Some ospitals do not recommend t eir patients to !uy medicines outside of t e ospital to assure t e aut enticity of medicines# Similarly, most of doctors already ave integration $it t e p armacy and medical supporting services at certain ospital# Medicine !rands t at $ill !e used entirely determined !y t e doctors unless t ere are patients $ o ave a sufficient medical kno$ledge asking to su!stituted medicines $it anot er generic !rand, t en t eir o!"ection $ill !e considered !y doctors# Some !rands of medicines are $ritten !y doctors t at are only sold at certain p armacies and so t at it $ill limit t e patient to seek su!stituted p armacies# )# T e availa!ility of su!stituted care ealt services 2lt oug t e su!stituted ealt services are $idely availa!le, !ut t e ospital eit er doctors never offered or informed a!out t e su!stitution to t e patient# Instead t ey tend to direct patients to utili-e medical supporting services, c oose particular !rand medicine, or !uying medicines in certain designated places# 7atients ignorance for medical care also led to t eir limitations to kno$ a!out t e e+istence of suc su!stitution# T e access of patients to social insurance ealt care can only !e o!tained t roug referral ealt services in t e administrative region $ ere t e patient is domiciled# Healt services provided s ould !e commenced from t e district ealt center level in $ ic t e prevailing system of referral is applied# If t e doctor at t e district ealt care institution considered t at t e patient re3uires more intensive care and more complete and competence

facilities t at cannot !e provided at t e district ealt center level to treat t e patient, t en t e patient $ill !e referred to a certain ospital aving more complete and competence facilities ' ig er level ospital type( in t e same administrative region# T is process is done in stages, in practice o$ever, t e referral ospital is often fart er t an t e ot er 5overnment ospitals outside t e administrative territory ad"acent# 2s a result, patients ave a limitation in c oosing t e referral ospital since t is is a conse3uence of t e district autonomy policy# 2lt og t ere are many medical doctors in t e ospital, !ut patients cannot freely select t e doctor $ o suited $it t e patient# T is is in contrast to t e patients coming from ig er class level# since t is policy as !een employed to increase t e efficiency of ospital management# 2lt oug t ere are many medicines su!stitutions, !ut t e patient as a limitation in selecting t e medicines# 7atients can only receive certain medicines t at ave !een specified in t e agreement !et$een t e ospital and t e social insurance# 0ut t is is not in t e case of t e patients coming from ig er class level# T e rates for ospital are varied depending on $ o determined t e tariff, t e rates for class III determined !y local government is 4p )6,666, -, $ ereas t e tariff prescri!ed class III determined !y 2SFES 'Social Healt Insurance( is 4p 86#666, - including routine la!oratory e+amination# T e difference in t at tariff can still !e claimed !y t e ospital even t oug la!oratory tests are not included# If t e ospital reduces t e re3uired la!oratory e+amination of t e patients for t e sake of increasing revenue, t en t e patients $ill !e armed !ecause t ey donBt receive ma+imum ealt services# ?onsumers $ill also ave t e limitations of selecting t e preferred medical supporting services suc as radiology and la!oratory# T e ceiling of ealt insurance costs of community vary !et$een different types of ospitals and different districts or regions# ?onse3uently, t is ceiling as caused t e limitation of t e community in fulfilling t e ealt care needs# 1# 0argaining po$er of ealt care services providers T ere are some agreements among pu!lic ospitals in determining t e tariff, $ ic may use different inputs# T ese agreements are strengt ened !y t e regional or district regulation# 7u!lic ospitals generally ave t e same rate in spite of aving different types of ospital# T e tariff proposed !y t e ospital $it in t e same administrative region and determined t roug t e regional or district regulation# T is could potentially lead to t e discrimination of services since patients must pay t e

same rates for ealt care facilities of different types of ospitals# Some ospitals determine a multi pricing tariff# T ere ave !een different tariff of ealt services for t e same input types in a different class of treatments, in t e different treatment installations, in t e different payment patterns, and in t e different payment types# T e tariff differences include medical treatments, medical doctorBs visits, tariff of medical supporting services, and medicine prices# T ese clearly indicate t e occurrence of price discrimination# Hospitals generally integrate t e outpatient and inpatient services to t e p armaceutical and medical supporting services# Suc integration may eventually increase t e efficiency and comfort of patients# Ho$ever, pay attention must !e given $ en t e integration is intentionally directed to patients to purc ase ealt care services at a ig er price t an ot er availa!le offers# Implicitly, it seems t at t ere as !een a tariff agreement !et$een t e specialists# T is is indicated !y t e prevalence rates of certain medical specialists in certain areas# &# 0arriers to entering t e ealt care industry for ne$ entrants 2ccessi!ility to esta!lis an alliance !et$een ospitals and !usiness actors in t e ealt care industry t at restrict certain !usinesses is a form of unfair competition# It is initiated $it t e offer and promotion to t e ospital# Ho$ever, in a partners ip $it medicine companies t at offer products to t e ospital !y giving souvenirs as $ell as !y conducting or sponsoring a symposium arranged !y ospitals or doctors, as $ell as conducting direct approac to t e doctor !y offering discounts or assistance for continuing medical education as $ell as providing a free seminar invitations and transportation costs, !y prioriti-ing t e many doctors $ o recommend products !usiness is vulnera!le to actions t at violate t e la$# In t e 2rticle /1 paragrap ')( Da$ of ?onsumer 7rotection stated t at t e offender s all !e pro i!ited from offering, promoting, or advertises medicines, traditional medicines, food supplements, medical devices, and ealt care services !y promising re$ards in t e form of goods or ot er services# 7ro i!ition as mentioned a!ove is certainly intended to protect consumers from selecting t e goods or services t at are intended not for t e !enefit of t e goods per se, !ut !ecause of t e influence of re$ard# 7er aps t e 3uestion arises, $ et er t e consumer can !e e3uated $it t e doctor, !ecause t e la$s governing it are t e ?onsumer 7rotection 2ct, $ ile t e consumer is referred to t e ultimate consumer of t e goods#

If $e e+amine t e purpose of t e legislation $ ic is intended to protect consumers, t en $e must consider t at if t e doctors recommend t e medicine !ecause of under influence of gifts in t e form of goods or services given !y t e !usiness actors# Since t e medicine on $ill eventually fall into t e ands of patients, a postscript on t e recommendation of doctors to o!tain medications t at are affected !y t e gifts given !y !usinesses# 0ased on t e a!ove considerations, t e selection of medicines or recommendation of using medications !ased on t e gifts of t e !usiness is a logical la$, also is a for!idden t ing, especially $ en t inking a!out a type of medicine t at is still muc t e same function produced !y ot er !usines actors# In terms of 0usiness ?ompetition Da$, t e action taken !y !usiness actors to provide discounted prices of certain gifts to t e ospital>p ysician is pro i!ited in t e ?onsumer 7rotection 2ct since t e actions may also !lock t e entry of ot er !usinesses to do t e same in t e ospitals# T is certainly as t e potential to !e classified as unfair competition, especially if t e action is associated $it t e Da$ @o# < of /999 concerning t e pro i!ition of Monopolistic 7ractices and Unfair 0usiness ?ompetition, $ ere t e articles of market domination as provided in 2rticle /1 as follo$* !usiness actors s all !e pro i!ited from engaging in one or more activities, eit er alone or toget er $it ot er !usiness actors, $ ic may result in monopolistic practices and or unfair !usiness competition in t e form. a# 4efused and or !locking certain !usinesses to conduct !usiness activities on t e same relevant market* or !# ?onsumers or customers of t eir competitors from engaging in a !usiness relations ip $it t at of t eir competitors* c# 4estrict circulation or sale of goods and or services on t e respective market* or d# 7ractice of discrimination against certain !usiness actors# T erefore, giving particular gifts to offer products t at are related to ealt as pro i!ited !y t e ?onsumer 7rotection 2ct s ould !e avoided since it as a potential to t e occurrence of violations of t e 2ct and t e ?onsumer 7rotection 2ct and t e 7ro i!ition of Monopolistic 7ractices Unfair ?ompetition# In general ospital can cooperate $it any insurance parties, !ot of $ ic offer made !y t e insurer or !y t e ospital, t ere is no pro!lem as long as t ere are no insurance companies are deterred from cooperating $it t e ospital# If t e

implementation of ealt services at t e ospital carried out according to t e e+isting rules $it regard to t e main provisions, t e ?onsumer 7rotection Da$, Da$ 7ractice of Medicine, and Da$ 7ro i!ition of Monopolistic 7ractices and Unfair 0usiness ?ompetition, as $ell as ot er la$s related e+pected t at t e principles and purposes of 2ct @o# )1 of /99)# <# T e intensity of competition in t e ealt care industry T ere is almost no difference !et$een specialists, differences !et$een different !rands of medicines can not !e kno$n > proven 3uality alt oug it may indicate t at t ere is a very large price dispersion !et$een t e !rand medicines $it one anot er# @ot only medicine t at as t e price dispersion, !ut tariff investigations, doctors tariff, and tariff treatment also as a large dispersion price !et$een one and anot er ospitals# For ospital, differentiation found in ospitalBs facilities and ot er types of ealt services provided# 2s for t e investigations, t ere is differentiation in !rand ealt tools and materials used !ut t e patient as no kno$ledge a!out t is# T ere are differences in medicine prices s arply at some ealt care institutions# Hospitals fully determine t e price of medicines to !e sold# In one study of participatory o!servation, t e medicine is sold nearly /666: over t e HET 'Hig est 7rice Devel(# Indeed, as long as t ere as !een no legislation regulating t e sale price of medicines, e+cept for generic medicines prescri!ed s ould not e+ceed t e HET# 2ccording to t e ospital, t e average margin of medicine prices is a!out )<:, !ut in reality t ere are ospitals t at set t e selling price is far a!ove t e HET# 7rices of medicines may also !e different for different payment types and different installations in t e ospital# T is is potentially detrimental to consumers as for e+ample for in-patients are forced to !uy medicines at a price of more e+pensive $ ere it is more restrictive !ecause t e situation of consumers $ o are !eing admitted to certain ospitals cause it is difficult to find anot er p armacy $ o cost c eaper# 7atient $it different care class also forced to pay more e+pensive medicines !ecause t e medicines to patients first class and AI7 are generally !randed medicines $ ile for economic class patients using generic medicines# Structure of ealt care costs also vary $ ere t ere are differences in tariffs and prices of medicines for treatment of different classes, different payment types and different installations# In addition to indicating t e occurrence of price discrimination $ ic is also a potential cause of discrimination so

t at services t at s ould interfere $it consumers# Conclusions and I$.& Conclusions /# 0argaining po$er of consumers in to several factors as follo$s* ealt ecommendations

t e rig ts received !y

care industry is small due

a# T e e+istence of information asymmetry and consumer ignorance a!out t e medical tec nical kno$ledge causes consumers are not a!le to determine t e products and services are most profita!le for t em# !# Some !usinesses in t e ealt care services industry tend to integrate vertically and ori-ontally# c# TodayBs market structure tends to form a po$erful force in social insurance# 7olicies and mec anisms on social ealt insurance is relatively open t e possi!ility of price discrimination and discriminatory service# Cn t e ot er and, t e dependency level of social ealt insurance mem!er is very ig # d# T e amount of supply of ealt demand for ealt services# services is smaller t an t e

)# Event oug t ere are availa!ility of small ealt care su!stitution, !ut t e ospital does not tend not to offer c oice to consumers# 1# 0argaining po$er of suppliers of ealt services is greater# @um!er of supply of ealt services in Indonesia is still smaller t an $it t e needs of ealt care itself# T ere is information asymmetry !et$een patients and ealt care providers# Healt care services providers ' ospitals, doctors and insurance( tend to do t e integration vertical $it medicine companies and medical support services# &# T ere are !arriers to entry to entering ealt care industries in Indonesia# 70F '0ig 7 armaceutical Industry( and ealt e3uipment companies t at ave a !usiness $it uge economies of scale, product differentiation, large capital needed to compete, t e resistance of t e 70F incum!ent as su!stantial resources include financial incentives# <# T e intensity of competition $it in ealt care industry is relatively lo$ alt oug t e num!er of ospitals, insurance companies, and p armaceutical companies are 3uite large, !ecause of asymmetry of information, vertical integration and t e suppliers $ o ave great market po$er, Ct er t an t at society tends to !e difficult to

differentiate companies# I$.'

t e

!enefits

of

t e

ospital,

and

p armaceutical

ecommendations ig est price level of !randed

/# 4e3uired regulation to govern t e medicines#

)# 4e3uired supervision regarding t e vertical integration of ealt services conducted in order to avoid a potentially tied in sales t at lead to price discrimination# 1# 4e3uired arrangement a suc t at t ere is no price discrimination for t e same input t at $ill potentially lead to discrimination of service $I. Implications and (imitations T e researc as some limitations, among ot ers are t e secondary data for t e relations ip among p armaceutical industries, ospitals, ealt insurances, and medical doctors# T e researc $as also conducted among a relatively small sample, and t ere is a lack of previous literature evidence to make significant comparisons# In addition, t e study is a cross-sectional study and lacks longitudinal information# T ere is a need for more detailed and olistic e+ploration of organi-ational culture in community of ospital, doctors and p armacy, using a greater diversity of researc met ods and a greater focus on patient-related outcomes $II. eferences

0ain, %oe S## '/9<9(# Industrial Organization, %o n ,iley and Sons, @e$ Gork ---------, '/9;8 (# Industrial Organization ')nd ed(# @e$ Gork. ,iley ---------, '/9&9(# T e ?urrenst States of T e Monopoly 7ro!lemsin T e United States, Harvard Da$ 4evie$, @o# ;) ?arlton, Dennis ,## ?arlton and %effrey M 7erloff, '/99&(# Industrial Organization ')nd ed(, Harper ?ollins ?ollege 7u!lis ers, @e$ Gork#

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