Does hospital competition save lives? Evidence from the English NHS patient choice reforms

This paper examines whether or not hospital competition in a market with fixed reimbursement prices can prompt improvements in clinical quality. In January 2006, the British Government introduced a major extension of their market-based reforms to the English National Health Service. From January 2006 onwards, every patient in England could choose their hospital for secondary care and hospitals had to compete with each other to attract patients to secure their revenue. One of the central aims of this policy was to create financial incentives for providers to improve their clinical performance. This paper assesses whether this aim has been achieved and competition led to improvements in quality. For our estimation, we exploit the fact that choice-based reforms will create sharper financial incentives for hospitals in markets where choice is geographically feasible and that prior to 2006, in the absence of patient choice, hospitals had no direct financial incentive to improve performance in order to attract more patients. We use a modified difference-in-difference estimator to analyze whether quality improved more quickly in more competitive markets after the government introduced its new wave of market-based reforms. Using AMI mortality as a quality indicator, we find that mortality fell more quickly (i.e. quality improved) for patients living in more competitive markets after the introduction of hospital competition in January 2006. Our results suggest that hospital competition in markets with fixed prices can lead to improvements in clinical quality

The Effects of Competition on Variation in the Quality and Cost of Medical Care

We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in less-competitive markets receive more intensive treatment than in more-competitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in less-competitive markets receive less intensive treatment than in more-competitive markets, and have significantly worse health outcomes. Since this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.

Physician-owned specialized facilities: focused factories or destructive competition?: a systematic review.

Multiple studies have investigated the business case of physician-owned specialized facilities (specialized hospitals and ambulatory surgery centers). However literature lacks integration. Building on the theoretical insights of disruptive innovation, a systematic review was conducted to assess the evidence base of these innovative delivery models. The Institute of Medicine’s quality framework (safe, effective, equitable, efficient, patient-centered and accessible care) was applied in order to evaluate the performance of such facilities. In addition the corresponding impact on full-service general hospitals was assessed. Database searches yielded 6,108 candidate articles of which 47 studies fulfilled the inclusion criteria. Overall the quality of the included studies was satisfactory. Our results show that little evidence exists in support of competitive advantages in favor of specialized facilities. Moreover even if competitive advantages exist, it is equally important to reflect on the corresponding impact on full service-general hospitals. The development of specialized facilities should therefore be monitored carefully

Effects of Competition under Prospective Payment on Hospital Costs among High and Low Cost Admissions: Evidence from California, 1983 - 1993

Competition and prospective payment systems have been widely used to attempt to control health care costs. Though much of the increase in medical costs over the past half-century has been concentrated among a few high-cost users of health care,prospective payment systems may provide incentives to selectively reduce expenditures on high-cost users relative to low-cost users and this pressure may be increased by competition. We use data on hospital charges and cost-to-charge ratios from California in 1983 and 1993 to examine the effects of competition on costs for high and low cost admissions before and after the establishment of the Medicare Prospective Payment System (PPS). Comparing persons above and below age 65 before and after the establishment of PPS, we find that competition is associated with increased costs before PPS in both age groups, but decreased costs afterwards, especially among those above age 65 with the highest costs. We conclude that the combination of competition and prospective payment systems may result in incentives to selectively reduce spending among the most expensive patients. This raises important issues relevant to the use Of competition and prospective payment to control costs and implies at minimum the need to carefully monitor outcomes for the sickest patients under prospective payment systems in competitive environments.

Competition and Quality: Evidence from the NHS Internal Market 1991-1999

Payer-driven competition has been widely advocated as a means of increasing efficiency in health care markets. The 1990s reforms to the UK health service followed this path. We examine whether competition led to better outcomes for patients, as measured by death rates after treatment following heart attacks. Using data on mortality as a measure of hospital quality and exploiting the policy change during the 1990s, we find that the relationship between competition and quality of care appears to be negative.competition, health care, mortality, quality of care

Changes in Hospital Efficiency after Privatization

We investigated the effects of privatization on hospital efficiency in Germany. To do so, we obtained bootstrapped DEA efficiency scores in the first stage of our analysis and subsequently employed a difference-in-difference matching approach within a panel regression framework. Our findings show that conversions from public to private for-profit status were associated with an increase in efficiency of between 3.2 and 5.4%. We defined four alternative post- privatization periods and found that the increase in efficiency after a conversion to private for- profit status appeared to be permanent. We also observed an increase in efficiency one year after hospitals were converted to private non-profit status, but our estimations suggest that this effect was transitory. Our findings also show that the efficiency gains after a conversion to private for-profit status were achieved through substantial decreases in staffing ratios in all analyzed staff categories with the exception of physicians. It was also striking that the efficiency gains of hospitals converted to for-profit status were significantly lower in the DRG era than in the pre-DRG era. Altogether, our results suggest that converting hospitals to private for-profit status may be an effective way to ensure the scarce resources in the hospital sector are used more efficiently.Privatization, Performance measurement, Data envelopment analysis, Propensity score matching, Germany