PROJECTS

Competition Effects of Physiotherapy Contracts, New Zealand

The problem

The Accident Compensation Corporation (ACC) of New Zealand, responsible for administering the country’s universal no-fault accidental injury insurance scheme, wanted to introduce an improved model for paying physiotherapists, which would, among other things, restrict them from charging any additional out-of-pocket fees to patients. Physiotherapists objected to this regime on the grounds that experienced physiotherapists would be paid the same fee as entry-level practitioners and alleged that the proposal would amount to price fixing. Physiotherapist objections meant that the ACC needed to seek clearance from the Commerce Commission, the New Zealand competition authority.

How we helped

Castalia reviewed the economic consequences of the proposed contractual arrangement. To do so we, defined the market and considered competition within this market. We concluded that the proposal to restrict physiotherapists who are being compensated by the insurance scheme from charging additional out-of-pocket fees did not amount to price fixing.

Impact

Using Castalia’s evidence, the ACC received Commerce Commission clearance for its proposal. The ACC now enters into service contracts with physiotherapists under the new regime.