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Competition in the NHS internal market: an overview of its effects on hospital prices and costs


  • Carol Propper

    (Department of Economics and School for Policy Studies, University of Bristol, UK)

  • Neil Söderlund

    (Centre for Health Policy, University of Witwatersrand, Johannesburg, South Africa)


The 1989 reforms of the UK National Health Service (NHS) introduced competition in the supply of hospital services. This paper synthesizes both the theory underlying the introduction of competition into the NHS, and the limited existing evidence on whether competition affects the prices posted by sellers of medical services, and the costs of producing these services. The results indicate high levels of price variability, widespread disregard for average cost pricing rules and some indication that competition had some effect on prices. It appears that lower prices may be offered to smaller purchasers, such as General Practice Fund Holders (GPFH). This effect of competition on price was mirrored, with a delay, in hospital costs. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Carol Propper & Neil Söderlund, 1998. "Competition in the NHS internal market: an overview of its effects on hospital prices and costs," Health Economics, John Wiley & Sons, Ltd., vol. 7(3), pages 187-197.
  • Handle: RePEc:wly:hlthec:v:7:y:1998:i:3:p:187-197 DOI: 10.1002/(SICI)1099-1050(199805)7:3<187::AID-HEC349>3.0.CO;2-F

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    References listed on IDEAS

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    Cited by:

    1. repec:ces:ifodic:v:11:y:2013:i:1:p:19083485 is not listed on IDEAS
    2. Cookson, Richard & Laudicella, Mauro & Donni, Paolo Li, 2013. "Does hospital competition harm equity? Evidence from the English National Health Service," Journal of Health Economics, Elsevier, vol. 32(2), pages 410-422.
    3. Y. J. F. M. Krabbe-Alkemade & T. L. C. M. Groot & M. Lindeboom, 2017. "Competition in the Dutch hospital sector: an analysis of health care volume and cost," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(2), pages 139-153, March.
    4. Jostein Grytten & Rune Sørensen, 2000. "Competition and dental services," Health Economics, John Wiley & Sons, Ltd., vol. 9(5), pages 447-461.
    5. Catherine Goodman & S. Patrick Kachur & Salim Abdulla & Peter Bloland & Anne Mills, 2009. "Concentration and drug prices in the retail market for malaria treatment in rural Tanzania," Health Economics, John Wiley & Sons, Ltd., vol. 18(6), pages 727-742.
    6. Richard Cookson & Diane Dawson, 2012. "Hospital Competition and Patient Choice in Publicly Funded Health Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 20 Edward Elgar Publishing.
    7. Carol Propper, 2013. "Competition, Incentives and the English NHS," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 11(1), pages 16-20, 04.
    8. Whynes, David K. & Baines, Darrin L., 2002. "Primary care physicians' attitudes to health care reform in England," Health Policy, Elsevier, vol. 60(2), pages 111-132, May.
    9. Luigi Siciliani & Steve Martin, 2007. "An empirical analysis of the impact of choice on waiting times," Health Economics, John Wiley & Sons, Ltd., vol. 16(8), pages 763-779.
    10. Cutler, David M. & Mas, Nuria, 2003. "Comparing non-fatal health across countries: Is the US medical system better?," IESE Research Papers D/525, IESE Business School.
    11. Antonio Nicita, 2004. "Il pendolo delle riforme nei sistemi sanitari europei," Working Papers CERM 05-2004, Competitività, Regole, Mercati (CERM).

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