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The Effects of regulation and competition in the NHS internal market: the case of GP Fund-Holder pri
... But, to date, there has been little empirical appraisal of the introduction of competition in the UK NHS. Empirical research has shown some impact of competition upon price: prices appear to be lower in more competitive markets, and also for buyers who have greater bargaining power (Propper 1996, Propper et al 1998). Studies of the behaviour of buyers of health care indicate considerable changes in behaviour, and some evidence of patients waiting less for nonemergency treatment (Dowling 1997, Propper et al 2000). ...
... The question is whether hospitals were bound by this rule. At a specialty level the answer is probably no (Propper 1996, Propper et al 1998), as abiding by the rule is difficult to observe at this level. However, at the whole hospital level the rule probably did more or less bind, as at this level it is easy to monitor. ...
... There is much less UK evidence on the impact of competition, despite this being a central plank of the internal market reforms. Glennerster (1998) examined. She concluded that the results offer some support to the view that competition will result in lower prices in the NHS internal market. Propper et al. (1998) re-address the issue of pricing in the NHS internal market by examining the posted prices for GP Fund Holders. They argue that despite regulation, market forces may have an impact on price. Using the same specialties as Propper (1996) they find that NHS internal market regulatory rules of no cross subsidisation between activities and pr ...
Payer-driven competition has been widely advocated as a means of increasing efficiency in health care markets. The 1990s reforms to the UK health service followed this path. We examine whether competition led to better outcomes for patients, as measured by death rates after treatment following heart attacks. Using data that until 1999 were not publicly available in any form on hospital level death rates, we find that the relationship between competition and quality of care appears to be negative. Greater competition is associated with higher death rates, controlling for patient mix and other observed characteristics of the hospital and the catchment area for its patients. However, the estimated impact of competition is small.
... There is much less UK evidence on the impact of competition in health care, despite this being a central plank of the NHS reforms of the 1990s.Glennerster (1998)draws together the empirical literature in this area and concludes that little evidence exists. Exceptions include the work ofPropper (1996), Propper et al. (1998), and Söderlund et al. (1997who investigate the impact of the internal market on prices, costs and productivity. In the only large-scale study to date of the impact of competition on quality,Propper et al (2002)examined the relationship between competition and quality. ...
... Instead, hospitals were required to set price equal to average cost for each service. At a specialty level there is evidence that hospitals were probably not bound by this rule (Propper 1996, Propper et al 1998), as abiding by the rule is difficult to observe at this level. However, at the whole hospital level the rule probably did more or less bind, as at this level it is easy to monitor. ...
... Glennerster (1998) draws together the empirical literature in this area and concludes that little evidence exists. Exceptions include the work of Propper (1996), Propper et al. (1998), and Söderlund et al. (1997) who investigate the impact of the internal market on prices, costs and productivity. In the only large-scale study to date of the impact of competition on quality, Propper et al (2002) examined the relationship between competition and quality. ...
Payer-driven competition has been widely advocated as a means of increasing efficiency in health care markets. The 1990s reforms to the UK health service followed this path. We examine whether competition led to better outcomes for patients, as measured by death rates after treatment following heart attacks. We exploit differences in competition over time and space to identify the impact of competition. Using data on mortality as a measure of hospital quality and exploiting the policy change during the 1990s, we find that the relationship between competition and quality of care appears to be negative.
... Recent studies using sophisticated econometric modelling techniques applied to complex data sets provide a more rigorous analysis of the impact of competition in the NHS on prices costs, productivity and quality (Propper, 1996;Propper et al., 1998;2004;Söderlund et al. 1997). Propper (1996) explores the impact of the NHS internal market on pricing for four specialities (general surgery, orthopaedics, ENT and gynaecology) and concludes that the results offer some support to the view that competition results in lower prices. ...
... In general, there is a near uniform consensus that internal market never created sharp incentives for hospitals or a significant degree of competition (Klein, 1999, Le Grand, 1999, Le Grand et al., 1998. There is some evidence that prices fell during the internal market (Propper, 1996, Propper et al., 1998, Soderlund et al., 1997), however, Soderlund et al (1997 found that higher competition was not associated with lower quality. Hamilton and Bramley-Harket (1999) examined the impact of the NHS internal market on patient waiting times and length of stay for hip replacement from 1991 through 1994/5. ...
This paper examines whether or not hospital competition in a market with fixed reimbursement prices can prompt improvements in clinical quality. In January 2006, the British government introduced a major extension of their market-based reforms to the English National Health Service. From January 2006 onwards, every patient in England could choose their hospital for secondary care, and hospitals had to compete with each other to attract patients to secure their revenue. In order to estimate the impact of hospital competition, we exploit the fact that choice-based reforms will have had more ‘bite’ in places where choice is geographically feasible. We use a modified difference-in-difference estimator to analyze whether quality improved more quickly in more competitive markets after the government introduced its new wave of market-based reforms. Using AMI mortality as a quality indicator, we find that mortality fell more quickly (i.e. quality improved) for patients living in more competitive markets after the introduction of hospital competition in January 2006. Our results suggest that hospital competition in markets with fixed prices can lead to improvements in clinical quality.
... A decision making process which is participative and open is associated with an entrepreneurial strategy.Chenhall and Morris (1995);Keats and Hitt (1988);Deniz et al. (2001)Competition-Competition between service providers has been shown to have the ability to reduce excess capacity and prices. Competition can reduce quality when service users are not directed towards higher quality providers .Propper (1996);Propper et al. (1998Propper et al. ( , 2004) ;Söderlund et al. (1997)Institutional Factors-Social capital has minimal links with performance. However, trust and civic norms have a significant impact. ...
... In this light persistent competition for patients similar to the way private companies compete for customers will spur efficiency, reduce operating costs and instil best practice management strategies within the various NHS trusts. NHS healthcare deliverers are also expected to make some profits or at least break – even in their operations (Söderlund et al 1998Söderlund et al , Palmer 2005). In due course they are required to make payments for all or part of the public borrowed capital at given interest rates as expected within the operating year. ...
This study emerged out of the difficulties to identify the type of management model(s) used by the NHS to manage it care delivery portfolios. Amidst a period of persistent negative returns on care delivery output, questionable quality issues, shrinking resources, public outcry about hospital performances and management distress, this study set up to identify and examine three aspects within operations management and strategy related to the healthcare in general and NHS healthcare delivery management system in particular. The first is to determine the type of strategic management model deployed by the NHS. Being the principal healthcare deliverer in the UK, the study initially assumes that the NHS deployed a robust cost management model which is hypothetically holistic and runs through the entire care delivery value chain. Investigation presented in this thesis shows that such a model is not in use within the NHS management framework. This vacuum led to the proposal that Target Cost Management (TCM) model could be adopted by the NHS. The main reason for this is that the TCM system will fits well within the NHS benchmarking operation and care delivery requirements. The second aspect of the study seeks to understand what the TCM model is all about plus the reasons why it is being considered as a more superior system than other costing methods. When compared with the popular cost–plus or the traditional costing system, TCM is identified as being ex–ante, price based, dynamic and strategic, meeting modern cost management needs while others are more ex–post and cost – based and considered outdated. Seeking whether TCM could be applied in the NHS, a case study is designed to test the hypothesis thereby justifying such proposition since there is limited implementation of this phenomenon of interest in other studies.
... 3. Geographical proximity, perceived quality and long term relatio nships seem to have been the principal criteria for GP choice of provider, rather than prices charged (Mahon et al, 1994; Baines and Whynes, 1996; Propper et al, 1998). 4. Patients of GP fundholders may have secured favourable waiting times in comparison with patients of non-fundholders (Dowling, 2000; Goodwin, 1998). 5. ...
In many health care systems primary care physicians act as 'gatekeepers' to secondary care. We investigates the impact of the UK fundholding scheme under which general practices could elect to hold a budget to meet the costs of elective surgery for their patients. We use a differences in differences methodology on a large four year panel of English general practices before and after the abolition of fundholding. Fundholding incentives reduced fundholder elective admission rates by 3.3% and accounted for 57% of the difference between fundholder and nonfundholder elective admissions, with 43% a selection effect due to unobservable differences in practice characteristics. Fundholding had no effect on emergency admissions.
... Centrally imposed rates of return on capital restrict access to and movement of capital itself, and most importantly, after allowing for capital adjustments prices for cost per case payment must be set equal to average cost. As Propper et al. [5] note, such a regulatory framework makes the hospital vulnerable to short-run changes in income, thereby providing an incentive to break the regulatory requirement that price equal average cost. Where there are joint costs, and the apportionment of costs to any individual service is not clearly specified, it is difficult to verify that the regulation is being maintained and considerable cross-subsidization of costs is likely, all of which weakens the incentive structure at the individual departmental and specialist level. ...
This article outlines the budgetary setting within the UK health-care system.
It is argued that while prospective budgets can give rise to efficient resource allocation outcomes, this relies on the budget being set at an appropriate level and the accompanying incentive structures being efficient. The organizational structures and the interrelationships are critical. The recent history of UK National Health Service reforms and expenditure is outlined. It is suggested that until recently, although the budget system has the potential to promote efficiency, the aggregate budget allocated to the NHS has probably been too low given public expectations, technology advances, and preferences for health care.
The aggregate budget is due to rise considerably over the next 5 years. While some incentive and regulatory provisions will move the budget toward an efficient allocation many microlevel incentive issues remain.
Whether efficient patterns of health-care allocation emerge remains open to debate, however, because the existing incentive mechanisms are not optimal.
... A limited number of studies of the impact of supply side competition on prices were undertaken. These showed that higher levels of competition were associated with lower prices, particularly for services which had lower costs (Propper, 1996 and Propper et al, 1998). These studies also suggest that NHS hospitals gave greater discounts to those buyers who were more able to move their contracts between sellers. ...
This review examines the performance of the UK healthcare system. After presenting data on the level and distribution of resources, three topics are examined. The first is the lessons from international comparisons of evidence on expenditure, equity and healthcare outcomes. The second is the lessons from the recent internal market reforms. The third is the lessons from an analysis of the role for private finance in UK healthcare. The review concludes that economists and policymakers need to focus more attention on the relationship between healthcare inputs — expenditure — and health outcomes, and, within this, on the incentives facing suppliers and demanders of healthcare.
... The evidence suggests that greater competition was associated with lower costs (Söderlund et al, 1997). The bargaining power of district health authorities was lower than that of GP fundholders, and hospitals that had greater business from fundholders had lower posted prices (Propper et al, 1998; Propper, 1996). On the other hand, two large-scale studies of the association between competition and quality suggest that quality – as measured by deaths of patients admitted to hospitals with heart attacks – fell during the internal market (Propper et al, 2004, Propper, Burgess and Abraham, 2002). ...
Extending choice in health care is currently popular amongst English, and other, politicians. Those promoting choice make an appeal to a simple economic argument. Competitive pressure helps make private firms more efficient and consumer choice acts as a major driver for efficiency. Giving service users the ability to choose applies competitive pressure to health care providers and, analogously with private markets, they will raise their game to attract business. The paper subjects this assumption to the scrutiny provided by a review of the theoretical and empirical economic evidence on choice in health care. The review considers several interlocking aspects of the current English choice policy: competition between hospitals, the responsiveness of patients to greater choice, the provision of information and the use of fixed prices. The paper concludes that there is neither strong theoretical nor empirical support for competition, but that there are cases where competition has improved outcomes. The paper ends with a discussion of the implications of this literature for policies to promote competition in the English NHS.
... Trusts were required to post prices nationally, were mandated to set price equal to average costs and were not able to carry surpluses or losses across financial years (Propper, 1995). 6 While at specialty level there is evidence that hospitals were probably not bound by the Ôprice ¼ costÕ rule (Propper, 1996; Propper et al., 1998), at the whole hospital level the rule was easy for the Department of Health to monitor and it imposed the requirement that hospitals break even annually. The effect of the reforms on a hospital was basically to tighten its annual budget constraint and increase the amount of uncertainty it faced. ...
This article exploits policy change by the UK government to identify the impact of competition on quality. It uses differences in competition over time and space to examine the impact of competition in an environment with limited quality signals in which hospitals competed mainly on price. Using AMI mortality as a measure of hospital quality we find that the relationship between competition and this measure of quality is negative. We also find that competition reduced waiting times. Our results indicate that hospitals in competitive markets reduced unmeasured and unobserved quality in order to improve measured and observed waiting times. Copyright 2008 The Author(s). Journal compilation Royal Economic Society 2008.
... A considerable literature has emerged analysing the effects of this reform. Much of it has been critical (see, for example, Light, 2001), some studies have noted some specific beneficial effects (see for example Hamilton and Bramley-Harker (1999) and Propper, et al's (1998 Propper, et al's ( , 2002) econometric analyses of specific procedures), and others have questioned whether the reform elicited any discernible effect (see Mays, et al, 2000). Despite the ambiguity over the impact of much of the reform the " new " Labour government elected in 1997 introduced what it termed as a reform package that would abandon the rather injudiciously termed 'internal market'. ...
This paper focuses on the reforms in England. Institutional differences between the two countries will doubtless provide interesting future contrastive exercises. 2 augmented this move towards consequentialism. In the UK the popularity of health economics programmes has increased as has the funding of evaluatory and prioritisation projects undertaken under the auspices of health economists within, or for, the NHS. At first sight this generation of information coupled with an increasing involvement of health economists would appear to support Lights rationale. Indeed, Lights reference to community empowerment resonates with the pragmatist philosopher John Deweys notion of warranted knowledge and processes of valuation, where those who possess expert knowledge have particular (Kantian) duties to inform the wider community in the process of forming efficacious policy. However, this paper argues that such an association is illusory for two major reasons: The performance measures of various NHS bodies are intended to serve as benchmark comparators with in some cases financial incentives attached. The institutional arrangements of the reformed NHS do not highlight mutuality as envisioned by Dewey, but a more consumer-oriented rubric (Keaney, 2001), where outcomes are the bottom-line and process rigidity may be a consequence. Second, and following from this, the nature of the information generated (and required) mainly relates to outcome(s), and is accordingly produced by a reductionist mode of thought or meta-methodology (or institution). Specifically, the paper contends that such outcomebased approaches assume a particular hierarchy of evidence that requires system closure, or near-closure. Evidence based policy and medicine are effectivel...
On the basis of concrete examples of health systems, several elements and arguments are added to the international debate about the importance of health care levels and their optimal interrelationship. The first level has three main functions: being the entry point to the system, facilitating and coordinating the itinerary of a patient within the system, and guarantee the integration and summary of health information on each patient. By describing the various obstacles and possible problems, mainly the commercial logics that is being introduced in many systems, the authors defined points of attention and suggested adjustments to assure universal access, equity, efficiency and efficacy, and sustainability of a health care system.
Health services are largely tax-financed in the United Kingdom and account for 14 per cent of general government spending. This paper analyses how the National Health Service (NHS) has been dealing with the associated expenditure pressures in the pre-1990 set-up and during the “quasi-market” years and how it is to cope with them under the “co-operative” arrangements put in place since 1997. While the budget constraint was traditionally tight in the NHS, leading to pervasive rationing and queuing as well as diversion towards the private sector, it has been relaxed somewhat with the budgetary boost announced by the Government in March 2000. The challenge is now to make the best use of the new-found financial room for improvement ...
Les services de santé sont largement financés par l'impôt au Royaume-Uni et représentent 14 pour cent de la dépense des administrations publiques. Ce document analyse comment le Service National de Santé (NHS) a géré les pressions à la dépense associées dans le contexte du système existant avant 1990 et pendant la période du « quasi-marché », et comment il est appelé à y faire face dans le cadre « co-opératif » mis en place depuis 1997. La contrainte budgétaire était traditionnellement rigoureuse dans le NHS, d'où un rationnement et des files d'attente généralisés, de même qu'un effet d'éviction vers le privé, mais elle a été assouplie quelque peu avec l'annonce par le gouvernement, en mars 2000, d'une injection de resources budgétaires supplémentaires. Le défi est maintenant de faire le meilleur usage de la marge de manœuvre financière nouvellement degage ...
This paper examines whether or not hospital competition in a market with fixed
reimbursement prices can prompt improvements in clinical quality. In January 2006, the
British Government introduced a major extension of their market-based reforms to the
English National Health Service. From January 2006 onwards, every patient in England
could choose their hospital for secondary care and hospitals had to compete with each
other to attract patients to secure their revenue. One of the central aims of this policy was
to create financial incentives for providers to improve their clinical performance. This
paper assesses whether this aim has been achieved and competition led to improvements
in quality. For our estimation, we exploit the fact that choice-based reforms will create
sharper financial incentives for hospitals in markets where choice is geographically
feasible and that prior to 2006, in the absence of patient choice, hospitals had no direct
financial incentive to improve performance in order to attract more patients. We use a
modified difference-in-difference estimator to analyze whether quality improved more
quickly in more competitive markets after the government introduced its new wave of
market-based reforms. Using AMI mortality as a quality indicator, we find that mortality
fell more quickly (i.e. quality improved) for patients living in more competitive markets
after the introduction of hospital competition in January 2006. Our results suggest that
hospital competition in markets with fixed prices can lead to improvements in clinical
quality.
Health facility surveys come in various guises. One dimension in which they vary is their motivation. Some seek to understand better links between households and providers. Others seek to understand better provider behavior and performance. Still others seek to understand the interrelationships between providers, while yet others seek to shed light on the linkages between government and providers. Health facility surveys differ too in the data they collect, in part due to the different motivations. Surveys also vary in the way they collect data, some relying on direct observation, some on record review, and some on interview. Some quality data are collected through clinical vignettes. Facility data have been put to a variety of uses, including planning and budgeting; monitoring, evaluation, and promoting accountability; and research. Lindel and Wagstaff review some of the literature under each heading and offer some conclusions regarding the current state of health facility surveys.
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.
In 1995 the Committee of Enquiry into National Health Insurance (NHI) recommended that formally employed individuals and their employers be required to fund at least a minimum package of hospital cover for workers and their dependents. This has recently been echoed in a Department of Health policy paper on social health insurance. This research aims to define and cost a minimum package of essential hospital care for competing (public and private) health insurers in South Africa. CRITERIA FOR PACKAGE DEFINITION: Based on the objectives implict in the NHI Committee report, the following criteria were used to define the essential package: (i) the extent to which there was another appropriate responsible party who should pay for treatment; (ii) the degree of discretion in deciding whether or not to provide treatment (roughly equivalent to 'urgency'); and (iii) the cost and effectiveness of treatment.
On the basis of the above criteria, 396 out of 598 possible interventions were included in the package. Using local mine hospital and private sector utilisation rates and mine hospital cost data, it was estimated that the essential inpatient package would cost around R502 per enrollee per year, using 1998 prices, for a working age population and their dependents. Age-sex standardised outpatient care costs in the mine hospital population studied were estimated at R183 per person per year. It was therefore estimated that the total inpatient and outpatient hospital package would cost around R685 per person per year.
The results presented in this paper are intended to inform the process of defining a national essential hospital benefit package. Assuming that contributions were proportionally related to income, and that costs should not exceed 6% of wages, the package should be affordable to all of those earning above R20,000 per year. Significant additional work is required, firstly at a technical level to assess the appropriateness of the prioritization approach used here, and secondly to take the debate around essential hospital benefits to broader political and public forums.
The objectives of this study were to describe the cost distribution of pneumonia treatment in tertiary hospitals in the National Capital Region (NCR) and to identify variations in costs in order to provide basic information to the Philippine Health Insurance Corporation (PHIC) for quality assurance and policy development. This study focuses on 3861 reimbursement claims, which come from 22 government and 38 private tertiary hospitals. Wide variations of cost existed among the hospitals and among the inpatients. Medicine was the leading expenditure in total costs (38%), second was examinations (27%), third was beds (22%) and the last was doctors fees (13%). The same ranking ocurred for reimbursement by PHIC. The private hospitals were more expensive than the government hospitals, but also more efficient in the length of hospitalization. The member patients spent more and were reimbursed more for clinical practice than the dependent patients. However, there was no difference in the length of hospitalization between member and dependent patients. There was no difference in the length of hospitalization and expenditure between Government Service Insurance System (GSIS) in 1997 and Social Security System (SSS) patients. Clinical guidelines should be effectively implemented and PHIC should contribute more to reduce existing variations, improve cost-effectiveness and the quality of clinical practices.
In this paper I model the demand for and supply of elective surgery using a modified Hotelling framework in which time, money, and distance are determinants of the demand for hospital care. Hospitals compete with each other in terms of the waiting time and consequently treat a certain number of patients. The basic model of hospital competition is then extended to incorporate the general practitioner (GP) fundholding scheme whereby the GPs are allocated a budget with which to buy care for their patients. Waiting time increases when production of care becomes more expensive, when the benefit obtained from treatment increases, when the unit cost of distance decreases, and when the importance given to time as a performance indicator decreases. The higher the money price the lower the waiting time. Finally, the money price paid by the GP fundholders is greater than that paid by the Health Authorities and greater than the hospitals marginal cost of production. As a consequence, fundholding patients pay a zero time price while non-fundholding patients experiment a positive waiting time.
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