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

Do financial incentives trump clinical guidance? Hip replacement in England and Scotland

Following devolution in 1999 England and Scotland's National Health Services diverged, resulting in major differences in hospital payment. England introduced a case payment mechanism from 2003/4, while Scotland continued to pay through global budgets. We investigate the impact this change had on activity for Hip Replacement. We examine the financial reimbursement attached to uncemented Hip Replacement in England, which has been more generous than for its cemented counterpart, although clinical guidance from the National Institute for Clinical Excellence recommends the later. In Scotland this financial differential does not exist. We use a difference-in-difference estimator, using Scotland as a control, to test whether the change in reimbursement across the two countries had an influence on treatment. Our results indicate that financial incentives are directly linked to the faster uptake of the more expensive, uncemented Hip Replacement in England, which ran against the clinical guidance

Does Pharmaceutical Price Regulation Affect the Adoption of Generic Competition? Evidence from the OECD, 1999-2008

Generic competition in the pharmaceutical market is an effective cost-containment mechanism that improves static efficiency and stimulates pharmaceutical innovation. There is no prior study that has empirically analysed the relative delays in adoption of generic competition. This paper aims to investigate how price regulations in the OECD affect the adoption of generic competition following the first global generic launch of each molecule. Drawing upon data from 1999 to 2008, we estimate the impact of ex-ante price and market size expectations on the probability of generic launch using discrete-time duration modelling with cloglog and logit regressions. The econometric strategy employs both parametric and non-parametric duration dependence and includes controls for generic competition in each country, firm characteristics and molecule heterogeneity. Ex-ante profit expectations result in faster adoption; both expected price and market size increase the probability of launch. Our findings suggest that neither molecule nor firm characteristics have a significant effect on generic adoption across different specifications. Instead, evidence indicates that generic competitors follow a locally oriented strategy in contrast to research-intensive pharmaceutical firms.generic competition, regulation, adoption, discrete-time duration analysis

Explaining Early Adoption on New Medicines: Regulation, Innovation and Scale

Understanding how price regulations affect the adoption of new patent-protected pharmaceutical technologies is a crucial question in designing health systems. This paper addresses this question by examining how price expectations shape the probability of launch, controlling for competition, market size expectations, firm and molecule heterogeneity across the major OECD markets during 1999-2008. Due to the censoring of launch data we use discrete time duration modelling with parametric and semi-parametric duration dependence specification. A sub-sample analysis including only EU countries also investigates the impact of price interdependencies and potential firm strategies in launch and pricing decisions. The empirical analysis of the global set of molecules which have diffused across more than 10 markets in the OECD, suggests there is a statistically significant and robust price effect in the adoption of new pharmaceutical technologies; low-prices result in reduced and slower adoption. Concentrated therapeutic subgroups, reflecting market crowding constitutes a significant barrier to entry. Sub-sample findings from the EU market suggest strategic firm behaviour with firms delaying launch in low-priced markets and attempts to maintain price differentials across interdependent markets to a minimum due to price complementarities. Firm economies of scale and the therapeutic importance of innovations are other important drivers of adoption speed.pharmaceutical innovation, regulation, adoption, duration analysis

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

The NHS under the coalition government and after the Election

The NHS has become a central issue of the general election. It comprises a fifth of all UK public expenditure: £129.5 billion in 2013-14 and expected to be £131.4 billion in 2015-16. The majority is spent on staff costs. Although the number of doctors has risen since 2010, the number of nurses has hardly risen. There is also growing concern over the level of GP recruitment