The utilization of the private sector in public healthcare offers opportunity to achieve efficiency and cost savings within Finland’s healthcare landscape. However, these benefits are not realized automatically; they require a functional and competitive market environment. In Finland, the private health and social care market has become increasingly concentrated over the last decade, primarily through a series of small-scale acquisitions that have escaped regulatory oversight. This high degree of concentration often results in weakened competition, which tends to drive up prices and compromise service quality. In the current landscape, the extensive reliance on private services to complement public provision can inadvertently increase overall costs rather than reduce them.
Market concentration is now evident across all payer groups in Finland, impacting prices for private individuals, occupational healthcare costs for companies and the Social Insurance Institution of Finland (Kela), and public procurement expenditures. Although the established welfare regions represent larger purchasers than the previous municipal structures, they frequently find themselves negotiating in markets with few viable alternatives. In such a concentrated environment, a large volume of purchases is not a sufficient guarantee of favorable pricing. This is particularly critical as Finnish welfare regions currently spend approximately five billion euros annually on private social and health services, making it one of their most significant expenditure items.
To improve the cost-effectiveness of public spending, welfare regions must leverage their own service production. Maintaining a significant level of internal production provides a vital benchmark for evaluating private sector pricing and strengthens the public sector’s negotiating position. Without this internal capacity, the Finnish public sector remains vulnerable to the pricing pressures of a concentrated market. Furthermore, it is strategically disadvantageous for the public sector to disclose its own production costs to the market, as this information could undermine its bargaining power during procurement.
Strategic procurement planning serves as another essential tool for cost control. In markets where competition is limited, public buyers cannot rely on the same market forces found in competitive environments. For instance, implementing properly calibrated price caps can simulate competitive pressure and prevent excessive price hikes. Additionally, utilizing a priority order in framework agreements can effectively direct demand toward the most cost-effective providers. These methods allow Finnish public buyers to influence market dynamics even when few competitors are present.
There is also a pressing need to evaluate the cost-effectiveness of private medical and support services reimbursed through Kela. Public reimbursements are only justified when they effectively alleviate pressure on the public healthcare system in a financially sustainable way. If reimbursements do not achieve this, it is more efficient to allocate those funds directly to the public healthcare system rather than subsidizing private services for individuals who would likely use them regardless of the subsidy.
Preventing further harmful market concentration is vital for the long-term sustainability of the Finnish health sector. While past consolidation cannot be reversed, future growth of dominant players through small acquisitions must be monitored. Currently, high prices might theoretically attract new entrants, but in practice, these new competitors are often acquired by larger chains before they can establish a foothold. To address this, authorities recommend extending the Finnish Competition and Consumer Authority’s (FCCA) powers to include a “right of referral,” allowing it to investigate acquisitions that fall below current turnover thresholds.
The Finnish Competition and Consumer Authority has identified ten concrete measures to address these challenges and potentially save hundreds of millions of euros. These actions include expanding merger control, improving price transparency for private services, and introducing price caps for occupational healthcare support services. Other recommendations involve reforming the Kela reimbursement system, transferring the responsibility for medical rehabilitation to welfare regions, and prioritizing cost-effective providers in framework agreements. Furthermore, developing the service voucher system, utilizing price caps more effectively in general procurement, reducing separate acquisitions for assisted living, and disseminating best procurement practices across Finland are essential steps to curbing public spending while maintaining service quality. Decisions on these measures are necessary now to ensure the permanent sustainability of Finland’s health and social care spending.