What effect does competition have on healthcare?

Health experts at the University of Bristol have been looking into the impact of the competition introduced into the NHS by the last Labour government:

Hospitals rated as better by the health quality regulator before the policy reform attracted more patients and from further away post reform. This suggests that patient choice is having some effect on their selection of hospitals and that more patients are choosing (with their GPs’ help) to go to better hospitals.

Moreover, they conclude that competition resulted in better services:

The research finds that hospitals located in areas where patients have had more choice since the NHS reforms have had higher clinical quality (as measured by lower death rates following admissions) and shorter lengths of stay than hospitals in less competitive areas. What’s more, the hospitals in competitive markets increased their quality without increasing total operating costs or shedding staff, suggesting that the policy of choice and competition in healthcare can have benefits.

The crucial ‘but’ is that in these cases prices were fixed – so it was competition based on quality, not price. In fact, price competition makes things worse:

Research for Britain showed that when competition was introduced in the early 1990s, in an NHS regime that allowed hospitals to negotiate prices as well as quality, there was a fall in clinical quality in more competitive areas.

The verdict from this research fits neatly with long-standing Liberal Democrat beliefs – both in the crucial role of the state in a health service (price regulation) but also in the liberal belief in a diversity of suppliers rather than one all-powerful monopolistic state (competition based on quality).

Hat-tip: Chris Nicholson.

2 responses to “What effect does competition have on healthcare?”

  1. the piece of research I would like to see is correlation between patient satisfaction and number/price of car parking spaces, all teh central london hospitals do badly in theses surveys, despite having v good outcomes, but negligible parking facilities.

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