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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 Imperial College Business School © Outline • • • • What theory tells us Evidence from policy reforms that promoted competition Evidence from study of management Evidence from analysis of merger activity Imperial College Business School © 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 Imperial College Business School © Empirical evidence from USA • General consensus that where prices are regulated, competition has increased quality (and lowered growth in expenditure) Imperial College Business School © 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 Imperial College Business School © 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 Imperial College Business School © 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) Imperial College Business School © 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) Imperial College Business School © 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 Imperial College Business School © Location of merged and unmerged hospitals (pre merger) NHS Acute Hospitals Never merged (109) Merged (106) www.imperial.ac.uk/business-school © Imperial College Business School 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 © Imperial College Business School 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 • • • • • 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