In brief: Competition in the public sector: good for the goose, good for the gander?

Zack Cooper outlines evidence on the benefits of competition in healthcare - and the implications for the coalition government's NHS reform plans.hospital competition, market structure, prospective payment, incentive structure

Hospital competition is good for patients, and for efficiency.

The coalition government has taken great pains to assure the public that the NHS budget will be ‘ring-fenced’, and thus not subject to the cuts of 20 to 40 per cent forecast for other Whitehall departments. At the same time, the NHS still faces (another) restructuring and the need to make significant savings. Zack Cooper considers how recent LSE Health research shows ways forward for the NHS to do more with less in the coming years.

The NHS White Paper: evolution or revolution?

Zack Cooper assesses the coalition government's plans for healthcare reform

Economic studies showing positive competition effects on hospital performance fully controlled for the factors cited by recent critics

Criticisms have been made of recent influential studies that show improving performance in hospitals operating in more competitive environments compared with hospitals that have a local monopoly on care. Zack Cooper, Steve Gibbons, Simon Jones and Alistair McGuire set the record straight. The claims by Pollock et al are based either on distortions of the original research, or on an apparent lack of understanding of modern economic analysi

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

Getting Serious About Strategy in the South China Sea

America is suffering from a strategy deficit in the South China Sea. For nearly a decade--and at accelerated speed since 2014--Beijing has been salami slicing its way to a position of primacy in that critical international waterway, while eroding the norms and interests Washington long has sought to defend. To date, however, Washington has struggled to articulate an effective response. The Obama administration opposed Chinese maritime expansion rhetorically and worked to improve the overall American military and geopolitical posture in the Asia-Pacific

Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS

This paper uses a difference-in-difference estimator to test whether the introduction of patient choice and hospital competition in the English NHS in January 2006 has prompted hospitals to become more efficient. Efficiency was measured using hospitals' average length of stay (LOS) for patients undergoing elective hip replacement. LOS was broken down into its two key components: the time from a patient's admission until their surgery and the time from their surgery until their discharge. Our results illustrate that hospitals exposed to competition after a wave of market-based reforms took steps to shorten the time patients were in the hospital prior to their surgery, which resulted in a decrease in overall LOS. We find that hospitals shortened patients' LOS without compromising patient outcomes or by operating on healthier, wealthier or younger patients. Our results suggest that hospital competition within markets with fixed prices can increase hospital efficiency.Hospital Competition, Market Structure, Prospective Payment, Incentive Structure

Does Competition Improve Public Hospitals' Efficiency? Evidence from a Quasi-Experiment in the English National Health Service

This paper uses a difference-in-difference style estimation strategy to test separately the impact of competition from public sector and private sector hospitals on the efficiency of public hospitals. Our identification strategy takes advantage of the phased introduction of a recent set of substantive reforms introduced in the English NHS from 2006 onwards. These reforms forced public sector health care providers to compete with other public hospitals and eventually to face competition from existing private sector providers for care delivered to publicly funded patients. In this study, we measure efficiency using hospitals' average length of stay (LOS) for patients undergoing elective surgery. For a more nuanced assessment of efficiency, we break LOS down into its two key components: the time from patients' admission to the hospital until their surgery and the time from their surgery until their discharge. Here, pre-surgery LOS serves as a proxy for hospitals' lean efficiency. Our results suggest that competition between public providers prompted public hospitals to improve their productivity by decreasing their pre-surgery, overall and post-surgery length of stay. In contrast, competition from private hospitals did not spur public providers to improve their performance and instead left incumbent public providers with a more costly case mix of patients and led to increases in post-surgical LOS.Hospital competition, market structure, prospective payment, incentivestructure

Does competition from private surgical centres improve public hospitals’ performance? Evidence from the English National Health Service

This paper examines the impact of competition from government-facilitated entry of private, specialty surgical centres on the efficiency and case mix of incumbent public hospitals within the English NHS. We exploit the fact that the government chose the location of these surgical centres (Independent Sector Treatment Centres or ISTCs) based on nearby public hospitals’ waiting times – not length of stay or clinical quality – to construct treatment and control groups that are comparable with respect to key outcome variables of interest. Using a difference-in-difference estimation strategy, we find that ISTC entry led to greater efficiency – measured by presurgery length of stay for hip and knee replacements – at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker, and who stayed in hospital longer after surgery

Surprise! Out-of-network billing for emergency care in the United States

Using insurance claims data capturing 8.9 million emergency episodes, we show that in 22% of cases, patients attended in-network hospitals, but were treated by out-of-network physicians. We find that out-of-network billing is concentrated in a small group of primarily for-profit hospitals. Within 50% of hospitals in our sample, fewer than 5% of patients saw out-of-network physicians. In contrast, at 15% of hospitals, more than 80% of patients saw out-of-network physicians. Out-of-network billing allows physicians to substantially increase their payment rates relative to what they would be paid for treating in-network patients and significantly improve their outside option when bargaining over in-network payments. Because patients cannot avoid out-of-network physicians during an emergency, physicians have an incentive to remain out-of-network and receive higher payment rates. Hospitals incur costs when out-of-network billing occurs within their facilities. We illustrate in a model and confirm empirically via analysis of two leading physician-outsourcing firms that physicians offer transfers to hospitals to offset the hospitals’ costs of allowing out-of-network billing to occur within their facilities. We find that a New York State law that introduced binding arbitration between physicians and insurers to settle surprise bills reduced out-of-network billing rates