Does competition improve public hospitals’ efficiency?: evidence from a quasi-experiment in the English National Health Service

Zack Cooper, Stephen Gibbons, Simon Jones and Alistair McGuire

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: 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 postsurgical LOS.

Keywords: Hospital competition; market structure; prospective payment; incentive structure (search for similar items in EconPapers)
JEL-codes: C21 I18 L1 R0 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2012-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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http://eprints.lse.ac.uk/42057/ Open access version. (application/pdf)

Related works:
Working Paper: Does Competition Improve Public Hospitals' Efficiency? Evidence from a Quasi-Experiment in the English National Health Service (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:42057

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