Transcript Slide 1

Evidence on competition in UK
health care
Carol Propper
CMPO University of Bristol
and Imperial College
London
Jan 2012 TILEC
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
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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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Evidence from UK
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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Location of merged and unmerged hospitals
(pre merger)
NHS Acute Hospitals
Never merged (109)
Merged (106)
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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)
© Imperial College Business School
Summary of the evidence from the UK
THANK YOU
© Imperial College Business School
References
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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).
© Imperial College Business School