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Competition among hospitals boosts performance

But competition on quality rather than price is likely to be key, study finds

Caroline White

Friday, 30 January 2015

Competition among hospitals is linked to better quality management and lower death rate, suggests research* published in The Review of Economic Studies.

But competition on quality rather than price is likely to be key, say the researchers from the London School of Economics Centre for Economic Performance.

They looked at 100 NHS hospital trusts in England (61% of acute care providers), interviewing a mixture of clinicians and managers in cardiology and orthopaedics to assess the impact of competition on hospital performance.

The measures they applied included clinical quality, staff satisfaction, length of stay, waiting times, infection rates, and the outcome of regulatory assessments.

They used deaths in hospital following emergency admissions for heart attacks and orthopaedic surgery as the measures of clinical performance.

They also factored in political marginality, because hospital closures in tightly contested seat are unlikely where the MP is a member of the governing party. After taking account of age and population density, these marginal constituencies tend to have a greater number of hospitals and therefore be subject to more competition.

The analysis showed that adding one extra hospital in a local area was linked to improved management quality and lower death rates of 8.8%.

“We have found that competition improves a core set of management practices that are likely to improve hospital productivity. However, a concern is that ‘better management’ in these indicators may not actually improve welfare in a public service environment,” commented lead author Professor John Van Reenen.

“For example, smarter managers may simply be able to better game the system, meet formal targets, and improve hospital finances without improving clinical outcomes. It is reassuring that in our findings, outcomes for patients and workers as measured by emergency [heart attack] survival rates and staff turnover rates also improve, suggesting that the benefits of competition are widely shared,” he added.

But he sounded a note of caution. “The reforms of the mid-2000s that increased patient choice in an environment of high NHS investment seem to have benefited patients and staff. Allowing competition of public sector hospitals on quality, but not on price was important for this policy success.

“It is very unclear whether recent reforms to decentralise NHS budgets to Clinical Commissioning Groups in the context of very tight NHS spending will increase competition or performance in the same way.”

The findings come as former Labour health minister Lord Ara Darzi told the BBC that it didn’t matter whether public, private, or voluntary sector providers deliver care in the NHS, as long as the quality of that care is high.

Speaking to BBC’s Newsnight on Wednesday, Lord Darzi said: "If the debate doesn't focus on the quality of care, then every patient and every clinician will know that the real argument about what matters has already been lost."

* Nicholas Bloom, et al. The Impact of Competition on Management Quality: Evidence from Public Hospitals. Review of Economic Studies (2015) doi: 10.1093/restud/rdu045

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