Hospital competition in the NHS

September 2012

Government used ESRC-funded research to inform its policies when increasing competition in the NHS.

"A study published by the London School of Economics found hospitals in areas with more choice had lower death rates. And there's now real evidence that England is delivering more for its money than any of the devolved nations, in part because of the competitive reforms initiated by Tony Blair and Alan Milburn." (Prime Minister David Cameron, 6 June 2011)Since 2006, NHS patients in England have been allowed to choose the public hospital where they receive care, with hospitals competing to offer care to NHS patients. Two years later, the policy was extended and patients could also choose to attend private specialist hospitals that were allowed to compete alongside NHS hospitals to deliver care to publicly funded patients.

Researchers from the Centre for Economic Performance (CEP) and the Spatial Economics Research Centre (SERC) analysed the impact of these reforms on hospitals’ quality and efficiency, using data from over 1.8 million patient observations. Their results showed competition between public hospitals improved productivity, but that competition between public and private hospitals did not produce similar dividends.

After competition was introduced into the NHS in 2006, hospitals facing greater competition decreased heart attack death rates about a third of a percentage point more quickly than monopoly providers. Hospitals facing greater competition also reduced the time patients spent in the hospital before and after surgery, relative to monopoly providers.

However, when private providers were allowed to compete with NHS hospitals after 2008, the researchers showed that NHS hospitals that faced the most competition from private hospitals found the length of stay for operations increased - possibly because private hospitals 'cherry-picked' the healthiest patients.

Their findings - that competition between public hospitals improved productivity, but that competition between public and private hospitals did not produce similar benefits - were cited extensively by all three major political parties, and have fed into the reform of the NHS by the government.

Impact

  • The research has been widely cited by the government, including the Prime Minister and Earl Howe, the Parliamentary Under-Secretary of State in the Department of Health, as evidence to support their policies to increase competition within the NHS.
  • The research brought empirical evidence into the policy-making process, shaping the design of the Health and Social Care Bill, which became an Act of Parliament in March 2012.
  • Research by the team indicated that price competition actually drives down the quality of care, as the complex nature of surgery and other health treatments makes it hard for patients to judge the quality and value for money of different treatments. Following Government plans to allow hospital price competition revealed in January 2011, two months later the Health Secretary had tabled amendments to the Health and Social Care Bill to prevent the new health regulator from setting differential prices for different classes of provider.
  • The research was also cited as a reason to amend the Bill by Lord Warner, who tabled an amendment to help remove further anti-competitive barriers in the NHS.
  • The NHS Future Forum was established to advise the government on how to improve the modernisation plans for the NHS. Choice and competition was one of the forum's main focus areas, and their subsequent report cites the CEP/SERC study as evidence that "quality in hospitals exposed to more competition has risen, length of stay has fallen and without any increase in expenditure at hospital level".

Further information