Entry restrictions in healthcare regulate where general practitioners (GPs) can establish practices, aiming to address inequities in the distribution of medical services. By preventing oversaturation in attractive urban areas, these policies encourage GPs to settle in underserved rural regions. However, such restrictions come at a cost: they limit competition, which could weaken incentives for delivering high-quality care.
A recent IZA discussion paper by Eduard Brüll, Davud Rostam-Afschar, and Oliver Schlenker examines how reducing the threat of competition—the potential for new GPs to enter a market—affects service quality and GP behavior in Germany. Their findings reveal a trade-off between equitable access and competitive pressures that drive quality.
Entry restrictions reduce the threat of competition
The study focuses on Germany’s needs-based planning system, where regions with a GP-to-population ratio exceeding 110% block new GPs from entering. This creates a natural experiment: areas just above and below the threshold have similar levels of current GP competition but differ in exposure to potential new entrants.
In entry-restricted regions, the probability of new GPs entering drops by 20 percentage points. However, the number of GPs per capita and other measures of actual competition remain unchanged. This means restrictions successfully reduce the threat of competition without altering the total supply of GPs.
Local monopolists lower service quality when competition is blocked
The study finds that GPs who face no nearby competitors—referred to as local monopolists—respond to reduced competition by lowering their service quality. In these areas, patients report lower satisfaction with GP friendliness, less time spent during consultations, and lower quality of medical advice.
In contrast, GPs in already competitive regions, where direct competition remains strong, show no significant changes in behavior when entry restrictions are imposed. The findings highlight how competition pressures GPs to maintain higher standards of care.
No impact on primary care access or regional health outcomes
Despite localized declines in service quality, entry restrictions do not affect broader access to care. GP working hours and the total volume of services provided remain unchanged, likely due to the reimbursement structure of Germany’s statutory health insurance (SHI) system.
The study also finds no significant effects on regional health outcomes, such as hospitalization or mortality rates. This is partly because only 20% of GPs operate as local monopolists, limiting the overall impact of entry restrictions on patient health.
Policymakers must balance equity and competition to improve care
The findings underscore the challenge of designing policies that improve access to healthcare without compromising service quality. Entry restrictions, while effective at addressing geographical inequities, inadvertently allow local monopolists to reduce their effort and performance.
To address these unintended consequences, policymakers could design performance-based incentives that reward high-quality care, even in low-competition areas. Providing targeted support for underserved regions, such as financial subsidies or professional development opportunities, could attract high-performing GPs without relying solely on restrictive regulations. Additionally, periodically reviewing entry thresholds and promoting internal competition—through benchmarking or collaboration—could help maintain competitive pressure and service standards.
Conclusion: Competitive pressure is essential for sustaining quality
While entry restrictions aim to ensure equitable access to care, they can unintentionally reduce service quality by weakening competition. Policymakers must navigate this trade-off carefully, ensuring that access does not come at the expense of quality. By preserving competitive incentives even in regulated markets, healthcare systems can achieve both equitable and high-quality care.