Wednesday, July 28, 2010
Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS
Posted by D. Daniel Sokol
Zack Cooper, Stephen Gibbons, Simon Jones, and Alistair McGuire ask Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS.
ABSTRACT: This paper uses a difference-in-difference estimator to test whether the introduction of patientchoice and hospital competition in the English NHS in January 2006 has prompted hospitalsto 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 twokey components: the time from a patient's admission until their surgery and the time fromtheir surgery until their discharge. Our results illustrate that hospitals exposed to competitionafter a wave of market-based reforms took steps to shorten the time patients were in thehospital prior to their surgery, which resulted in a decrease in overall LOS. We find thathospitals shortened patients' LOS without compromising patient outcomes or by operating onhealthier, wealthier or younger patients. Our results suggest that hospital competition withinmarkets with fixed prices can increase hospital efficiency.