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Does competition from private surgical centres improve public hospitals’ performance? Evidence from the English National Health Service

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  • Cooper, Zack
  • Gibbons, Stephen
  • Skellern, Matthew

Abstract

This paper examines the impact of a government programme which facilitated the entry of for-profit surgical centres to compete against incumbent National Health Service hospitals in England. We examine the impact of competition from these surgical centres on the efficiency – measured by pre-surgery length of stay for hip and knee replacement patients – and case mix of incumbent public hospitals. We exploit the fact that the government chose the broad locations where these surgical centres (Independent Sector Treatment Centres or ISTCs) would be built based on local patient waiting times – not length of stay or clinical quality – to construct treatment and control groups that are comparable with respect to key outcome variables of interest. Using a difference-in-difference estimation strategy, we find that the entry of surgical centres led to shorter pre-surgery length of stay at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker. This paper highlights a potential trade-off that policymakers face when they promote competition from private, for-profit firms in markets for the provision of public services.

Suggested Citation

  • Cooper, Zack & Gibbons, Stephen & Skellern, Matthew, 2018. "Does competition from private surgical centres improve public hospitals’ performance? Evidence from the English National Health Service," LSE Research Online Documents on Economics 90094, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:90094
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    File URL: http://eprints.lse.ac.uk/90094/
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    Cited by:

    1. Walter Beckert & Elaine Kelly, 2021. "Divided by choice? For‐profit providers, patient choice and mechanisms of patient sorting in the English National Health Service," Health Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 820-839, April.
    2. Brekke, Kurt R. & Canta, Chiara & Siciliani, Luigi & Straume, Odd Rune, 2021. "Hospital competition in a national health service: Evidence from a patient choice reform," Journal of Health Economics, Elsevier, vol. 79(C).
    3. Bjorvatn, Afsaneh, 2018. "Private or public hospital ownership: Does it really matter?," Social Science & Medicine, Elsevier, vol. 196(C), pages 166-174.
    4. Zhang, Jianhong & Jiang, Jiangang, 2024. "Investment deregulation and innovation performance of Chinese private firms," Journal of Financial Stability, Elsevier, vol. 70(C).
    5. Moscelli, Giuseppe & Gravelle, Hugh & Siciliani, Luigi & Santos, Rita, 2018. "Heterogeneous effects of patient choice and hospital competition on mortality," Social Science & Medicine, Elsevier, vol. 216(C), pages 50-58.
    6. Ge Ge & Tor Iversen & Oddvar Kaarbøe & Øyvind Snilsberg, 2024. "Impacts of Norway's extended free choice reform on waiting times and hospital visits," Health Economics, John Wiley & Sons, Ltd., vol. 33(4), pages 779-803, April.
    7. Johannes S. Kunz & Carol Propper & Kevin E. Staub & Rainer Winkelmann, 2024. "Assessing the quality of public services: For‐profits, chains, and concentration in the hospital market," Health Economics, John Wiley & Sons, Ltd., vol. 33(9), pages 2162-2181, September.
    8. Carine Milcent, 2021. "Competition in French hospital: Does it impact the patient management in healthcare?," Working Papers halshs-03152752, HAL.
    9. Carine Milcent, 2021. "Competition in French hospital: Does it impact the patient management in healthcare?," Working Papers halshs-03152752, HAL.
    10. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2021. "Hospital competition and quality for non‐emergency patients in the English NHS," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 382-414, June.
    11. Kortelainen, Mika & Laine, Liisa T. & Lavaste, Konsta & Saxell, Tanja & Siciliani, Luigi, 2023. "Improving Performance Through Allocation and Competition: Evidence from a Patient Choice Reform," Working Papers 156, VATT Institute for Economic Research.
    12. Gobillon, Laurent & Milcent, Carine, 2017. "Competition and hospital quality: Evidence from a French natural experiment," CEPR Discussion Papers 11773, C.E.P.R. Discussion Papers.
    13. Kelly, Elaine & Stoye, George, 2020. "The impacts of private hospital entry on the public market for elective care in England," Journal of Health Economics, Elsevier, vol. 73(C).
    14. Daniel Herrera-Araujo & Lise Rochaix, 2020. "Competition between Public and Private Maternity Care Providers in France: Evidence on Market Segmentation," IJERPH, MDPI, vol. 17(21), pages 1-19, October.
    15. Carmen-Pilar Martí-Ballester, 2020. "Financial Performance of SDG Mutual Funds Focused on Biotechnology and Healthcare Sectors," Sustainability, MDPI, vol. 12(5), pages 1-15, March.
    16. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2018. "Effects of Market Structure and Patient Choice on Hospital Quality for Planned Patients," School of Economics Discussion Papers 1118, School of Economics, University of Surrey.
    17. Milcent, Carine, 2023. "The sorting effect in healthcare access: Those left behind," Economics & Human Biology, Elsevier, vol. 51(C).
    18. Rachet-Jacquet, Laurie & Gutacker, Nils & Siciliani, Luigi, 2021. "Scale economies in the health sector: The effect of hospital volume on health gains from hip replacement surgery," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 704-729.
    19. Guccio, Calogero & Lisi, Domenico & Martorana, Marco Ferdinando & Pignataro, Giacomo, 2024. "Is local competition effective in improving quality and efficiency of hospitals? Insights from an asymmetric spatial competition model," Research in Economics, Elsevier, vol. 78(3).
    20. Shimaa Elkomy & Zahra Murad & Veronica Veleanu, 2018. "Does Leadership Matter for Healthcare Service Quality? Evidence from NHS England," Working Papers in Economics & Finance 2018-08, University of Portsmouth, Portsmouth Business School, Economics and Finance Subject Group.
    21. Yang, Ou & Chan, Marc K. & Cheng, Terence C. & Yong, Jongsay, 2020. "Cream skimming: Theory and evidence from hospital transfers and capacity utilization," Journal of Economic Behavior & Organization, Elsevier, vol. 173(C), pages 68-87.

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    More about this item

    Keywords

    hospital competition; public-private competition; market entry; market structure; outsourcing; hospital efficiency; risk selection; cream skimming; public services;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H57 - Public Economics - - National Government Expenditures and Related Policies - - - Procurement
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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