IDEAS home Printed from https://ideas.repec.org/p/ifs/ifsewp/16-15.html
   My bibliography  Save this paper

New Joints: Private providers and rising demand in the English National Health Service

Author

Listed:
  • Elaine Kelly

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

  • George Stoye

    (Institute for Fiscal Studies and Institute for Fiscal Studies)

Abstract

Reforms to public services have extended consumer choice by allowing for the entry of private providers. The aim is to generate competitive pressure to improve quality when consumers choose between providers. However, for many services new entrants could also affect whether a consumer demands the service at all. We explore this issue by considering how demand for elective surgery responds following the entry of private providers into the market for publicly funded health care in England. For elective hip replacements, we find that demand shifts account for at least 7% of public procedures conducted by private hospitals. These results are robust to instrumenting for location using the presence of existing healthcare facilities. Exploiting rarely used clinical audit data, we show that these additional procedures are not substitutions from privately funded procedures, and represent new surgeries, at least within a given year. The increase in volumes resulting from a demand shift improve consumer welfare, but impose fiscal costs, and do not contribute the original aim of the reforms to stimulate competition. This is an updated version of W15/22 New joints: private providers and rising demand in the English National Health Service.

Suggested Citation

  • Elaine Kelly & George Stoye, 2016. "New Joints: Private providers and rising demand in the English National Health Service," IFS Working Papers W16/15, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:16/15
    as

    Download full text from publisher

    File URL: https://www.ifs.org.uk/uploads/publications/wps/WP201615.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Caroline M. Hoxby, 2003. "The Economics of School Choice," NBER Books, National Bureau of Economic Research, Inc, number hox03-1.
    2. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    3. Victor R. Fuchs, 2018. "The Supply of Surgeons and the Demand for Operations," World Scientific Book Chapters, in: Health Economics and Policy Selected Writings by Victor Fuchs, chapter 16, pages 171-192, World Scientific Publishing Co. Pte. Ltd..
    4. Zack Cooper & Stephen Gibbons & Simon Jones & Alistair McGuire, 2011. "Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms," Economic Journal, Royal Economic Society, vol. 121(554), pages 228-260, August.
    5. Chandra, Amitabh & Cutler, David & Song, Zirui, 2011. "Who Ordered That? The Economics of Treatment Choices in Medical Care," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 397-432, Elsevier.
    6. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2008. "Competition and waiting times in hospital markets," Journal of Public Economics, Elsevier, vol. 92(7), pages 1607-1628, July.
    7. Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(2), pages 577-615.
    8. Timothy Besley & Maitreesh Ghatak, 2003. "Incentives, Choice, and Accountability in the Provision of Public Services," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 19(2), pages 235-249, Summer.
    9. Caroline Minter Hoxby, 2003. "School Choice and School Productivity. Could School Choice Be a Tide that Lifts All Boats?," NBER Chapters, in: The Economics of School Choice, pages 287-342, National Bureau of Economic Research, Inc.
    10. Amy Finkelstein & Matthew Gentzkow & Heidi Williams, 2016. "Sources of Geographic Variation in Health Care: Evidence From PatientMigration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1681-1726.
    11. Simon Burgess & Ellen Greaves & Anna Vignoles & Deborah Wilson, 2015. "What Parents Want: School Preferences and School Choice," Economic Journal, Royal Economic Society, vol. 125(587), pages 1262-1289, September.
    12. Thomas J. Nechyba, 2000. "Mobility, Targeting, and Private-School Vouchers," American Economic Review, American Economic Association, vol. 90(1), pages 130-146, March.
    13. Pauline Musset, 2012. "School Choice and Equity: Current Policies in OECD Countries and a Literature Review," OECD Education Working Papers 66, OECD Publishing.
    14. Besley, Timothy & Hall, John & Preston, Ian, 1999. "The demand for private health insurance: do waiting lists matter?," Journal of Public Economics, Elsevier, vol. 72(2), pages 155-181, May.
    15. Katherine Ho, 2006. "The welfare effects of restricted hospital choice in the US medical care market," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1039-1079.
    16. Marco Varkevisser & Stéphanie Geest & Frederik Schut, 2010. "Assessing hospital competition when prices don’t matter to patients: the use of time-elasticities," International Journal of Health Economics and Management, Springer, vol. 10(1), pages 43-60, March.
    17. Martin Gaynor, "undated". "What Do We Know About Competition and Quality in Health Care Markets?," GSIA Working Papers 2006-E62, Carnegie Mellon University, Tepper School of Business.
    18. Imberman, Scott A., 2011. "The effect of charter schools on achievement and behavior of public school students," Journal of Public Economics, Elsevier, vol. 95(7), pages 850-863.
    19. Propper, Carol, 2000. "The demand for private health care in the UK," Journal of Health Economics, Elsevier, vol. 19(6), pages 855-876, November.
    20. Propper, Carol & Rees, Hedley & Green, Katherine, 2001. "The Demand for Private Medical Insurance in the UK: A Cohort Analysis," Economic Journal, Royal Economic Society, vol. 111(471), pages 180-200, May.
    21. Jonathan Gruber & Maria Owings, 1996. "Physician Financial Incentives and Cesarean Section Delivery," RAND Journal of Economics, The RAND Corporation, vol. 27(1), pages 99-123, Spring.
    22. Helen F. Ladd, 2002. "School Vouchers: A Critical View," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 3-24, Fall.
    23. Walter Beckert & Mette Christensen & Kate Collyer, 2012. "Choice of NHS‐funded Hospital Services in England," Economic Journal, Royal Economic Society, vol. 122(560), pages 400-417, May.
    24. Peter Arcidiacono, 2005. "Affirmative Action in Higher Education: How Do Admission and Financial Aid Rules Affect Future Earnings?," Econometrica, Econometric Society, vol. 73(5), pages 1477-1524, September.
    25. Janet Currie & Enrico Moretti, 2003. "Mother's Education and the Intergenerational Transmission of Human Capital: Evidence from College Openings," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1495-1532.
    26. Vrangbaek, Karsten & Robertson, Ruth & Winblad, Ulrika & Van de Bovenkamp, Hester & Dixon, Anna, 2012. "Choice policies in Northern European health systems," Health Economics, Policy and Law, Cambridge University Press, vol. 7(1), pages 47-71, January.
    27. Capps, Cory & Dranove, David & Satterthwaite, Mark, 2003. "Competition and Market Power in Option Demand Markets," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 737-763, Winter.
    28. Propper, Carol & Sutton, Matt & Whitnall, Carolyn & Windmeijer, Frank, 2010. "Incentives and targets in hospital care: Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 94(3-4), pages 318-335, April.
    29. Skinner, Jonathan, 2011. "Causes and Consequences of Regional Variations in Health Care," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 45-93, Elsevier.
    30. Derek Neal, 2002. "How Vouchers Could Change the Market for Education," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 25-44, Fall.
    31. Hsieh, Chang-Tai & Urquiola, Miguel, 2006. "The effects of generalized school choice on achievement and stratification: Evidence from Chile's voucher program," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1477-1503, September.
    32. Richard D. Auster & Ronald L. Oaxaca, 1981. "Identification of Supplier Induced Demand in the Health Care Sector," Journal of Human Resources, University of Wisconsin Press, vol. 16(3), pages 327-342.
    33. Montgomery, Mark, 2002. "A nested logit model of the choice of a graduate business school," Economics of Education Review, Elsevier, vol. 21(5), pages 471-480, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bíró, Anikó & Hellowell, Mark, 2016. "Public–private sector interactions and the demand for supplementary health insurance in the United Kingdom," Health Policy, Elsevier, vol. 120(7), pages 840-847.
    2. Cooper, Zack & Gibbons, Stephen & Skellern, Matthew, 2018. "Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service," Journal of Public Economics, Elsevier, vol. 166(C), pages 63-80.
    3. Brenna, Elenka & Polistena, Barbara & Spandonaro, Federico, 2023. "Analysing outpatient care access for planning purposes: The Basilicata Region experience," Evaluation and Program Planning, Elsevier, vol. 99(C).
    4. Laurie Rachet-Jacquet & Nils Gutacker & Luigi Siciliani, 2019. "The causal effect of hospital volume on health gains from hip replacement surgery," Working Papers 168cherp, Centre for Health Economics, University of York.
    5. Dardanoni, V.; & Laudicella, M.; & Li Donni, P.;, 2018. "Hospital Choice in the NHS," Health, Econometrics and Data Group (HEDG) Working Papers 18/04, HEDG, c/o Department of Economics, University of York.
    6. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hugh Gravelle & Rita Santos & Luigi Siciliani & Rosalind Goudie, 2012. "Hospital Quality Competition Under Fixed Prices," Working Papers 080cherp, Centre for Health Economics, University of York.
    2. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," Working Papers 088cherp, Centre for Health Economics, University of York.
    3. Rita Santos & Hugh Gravelle & Carol Propper, 2013. "Does quality affect patients’ choice of doctor? Evidence from the UK," The Centre for Market and Public Organisation 13/306, The Centre for Market and Public Organisation, University of Bristol, UK.
    4. Martin Gaynor & Carol Propper & Stephan Seiler, 2012. "Free to Choose? Reform and Demand Response in the English National Health Service," The Centre for Market and Public Organisation 12/297, The Centre for Market and Public Organisation, University of Bristol, UK.
    5. Martin Gaynor & Kate Ho & Robert J. Town, 2015. "The Industrial Organization of Health-Care Markets," Journal of Economic Literature, American Economic Association, vol. 53(2), pages 235-284, June.
    6. Martin Gaynor & Carol Propper & Stephan Seiler, 2016. "Free to Choose? Reform, Choice, and Consideration Sets in the English National Health Service," American Economic Review, American Economic Association, vol. 106(11), pages 3521-3557, November.
    7. Jean-Michel Plassard & Nhu Tran Thi Thanh, 2009. "Liberté de choix des élèves et concurrence des établissements : un survey de l'analyse du pilotage des systèmes éducatifs par les quasi-marchés," Revue d'économie industrielle, De Boeck Université, vol. 0(2), pages 99-130.
    8. Gaynor, Martin & Town, Robert J., 2011. "Competition in Health Care Markets," Handbook of Health Economics, in: Mark V. Pauly & Thomas G. Mcguire & Pedro P. Barros (ed.), Handbook of Health Economics, volume 2, chapter 0, pages 499-637, Elsevier.
    9. Roos, Anne-Fleur & O’Donnell, Owen & Schut, Frederik T. & Van Doorslaer, Eddy & Van Gestel, Raf & Varkevisser, Marco, 2020. "Does price deregulation in a competitive hospital market damage quality?," Journal of Health Economics, Elsevier, vol. 72(C).
    10. 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).
    11. Kurt R. Brekke & Luigi Siciliani & Odd Rune Straume, 2013. "Hospital Mergers: A Spatial Competition Approach," NIPE Working Papers 04/2013, NIPE - Universidade do Minho.
    12. Cooper, Zack & Gibbons, Stephen & Skellern, Matthew, 2018. "Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service," Journal of Public Economics, Elsevier, vol. 166(C), pages 63-80.
    13. Timothy Besley & James M. Malcolmson, 2016. "Choice and Competition in Public Service Provision," STICERD - Public Economics Programme Discussion Papers 29, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    14. Besley, Timothy & Malcomson, James M., 2018. "Competition in public service provision: The role of not-for-profit providers," Journal of Public Economics, Elsevier, vol. 162(C), pages 158-172.
    15. 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).
    16. Elisa Facchetti & Lorenzo Neri & Marco Ovidi, 2021. "Should you Meet The Parents? The impact of information on non-test score attributes on school choice," DISCE - Working Papers del Dipartimento di Economia e Finanza def113, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    17. Domenico Lisi & Luigi Siciliani & Odd Rune Straume, 2020. "Hospital competition under pay‐for‐performance: Quality, mortality, and readmissions," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 289-314, April.
    18. Zack Cooper & Stuart V Craig & Martin Gaynor & John Van Reenen, 2019. "The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(1), pages 51-107.
    19. Natalie Baier & Lisa-Marie Sax & Leonie Sundmacher, 2019. "Trends and regional variation in rates of orthopaedic surgery in Germany: the impact of competition," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(1), pages 163-174, February.
    20. Michela Tincani, 2014. "School Vouchers and the Joint Sorting of Students and Teachers," Working Papers 2014-012, Human Capital and Economic Opportunity Working Group.

    More about this item

    Keywords

    public service choice; healthcare demand; geographic variation;
    All these keywords.

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ifs:ifsewp:16/15. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emma Hyman (email available below). General contact details of provider: https://edirc.repec.org/data/ifsssuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.