Carol Propper

CMPO University of Bristol and Imperial College London

Jan 2012 TILEC

Evidence on competition in UK health care

 

Preliminaries 

• Competition on the insurance side and/or on the provision side

• The UK – unlike the Netherlands – has experience only of the latter

• My talk covers lessons from UK so will focus on provider competition

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Outline

• What theory tells us• Evidence from policy reforms that promoted competition• Evidence from study of management• Evidence from analysis of merger activity

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Theory

• Theory of competition on supply side• Focus has been on competition between hospitals• Assumption of profit maximisation• Some market specific models, others derive from other

industries

• Bottom line• Competition will increase quality if prices are regulated (similar to

schools)• Anything can happen if prices not regulated - depends on

relative elasticity of demand for price and quality

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Empirical evidence from USA

• General consensus that where prices are regulated, competition has increased quality (and lowered growth in expenditure)

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Evidence from UK

1. Blair reforms – choose and book + PbR (2006)

• Regulated prices similar to DRGs for elective and emergency treatment in acute sector

• Hospitals had to break even; subset allowed to keep surpluses

• Intention to give incentives to compete on quality

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Evidence from UK : Blair reforms

• Has care seeking behaviour changed?• Not everyone has exercised choice (Dixon et al Kings Fund)• But evidence of changes in demand patterns post policy -

hospitals that were better pre policy attracted more patients and drew patients from more neighbourhoods

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Evidence from UK : Blair reforms

• Evidence on outcomes• In hospitals exposed to more competition 

• Quality has risen • Length of stay has fallen • No increase in expenditure at hospital level

• No evidence of increase in inequalities in treatment (Cookson and Laudicella 2010)

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Evidence from UK

2. Management in NHS hospitals and competition• Study of management practices in NHS hospitals

• Based on international best practice in management

• Better management is • Associated with a range of better outcomes (quality, financial

performance, waiting times, staff satisfaction and regulator ratings)

• Impact of competition on management• Exploits politics of hospital closure to instrument competition• Finds management is better in hospitals in competitive areas

(Bloom et al 2010)

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3. Evidence from hospital consolidation

• US experience – consolidations raise prices, have mixed impact on quality, reduce costs only slightly (Vogt 2009)

• UK experience• 1997 onwards - wave of hospital reconfigurations• Over half of acute trusts involve in a reconfiguration with another

trust • Median number of hospitals in a market fell from 7 to 5

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Evidence from UK

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Location of merged and unmerged hospitals(pre merger)

NHS Acute HospitalsNever merged (109)Merged (106)

Evidence from U.K: Hospital consolidation

• Analysis• Examine hospital performance before and after merger are

compared• Comparison data from same period for ‘control’ group of non

merging hospitals

• Results - consolidation led to • Lower growth in admissions and staff numbers but no increase in

productivity• No evidence of reduction in deficits• No evidence of improvement in quality

• Summary - costly to bring about with few visible gains other than reduction in capacity

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Summary of the evidence from the UK

• Competition has been beneficial in UK under Choose and Book regime + PbR

• Old style planning (local mergers) does not seem to have brought large gains

• No evidence of growth of inequalities• Many areas not investigated to date (GP competition;

networks, mental health)

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Summary of the evidence from the UK

THANK YOU

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References

• Propper, C, Burgess, S, Gossage, D (2008) Competition and Quality: evidence from the NHS Internal Market 1991-99. Economic Journal 118, 138-170.

• Gaynor, M, Moreno Serra, R and Propper, C (2010) Death By Market Power: reforms, competition and the NHS. http://www.bristol.ac.uk/cmpo/publications/papers/2010/wp242.pdf

• Nicholas Bloom, Carol Propper, Stephan Seiler and John van Reenan (2010) The Impact of Competition on Management Quality: Evidence from UK Public Hospitals. NBER WP 16032

• Gaynor, M, Laudicella, M and Propper, C (2012) Can governments do it better? Merger mania and hospital outcomes in the English NHS CMPO Discussion paper 12/281

• Cooper et al (2011) Does Hospital Competition save lives: Evidence from the NHS. Economic Journal 212, 554 ( August 2001).

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