1. Is competition a force for good in hospitals?
Is the same true for other services and
settings?
Carol Propper
Imperial College London & University of Bristol
Nuffield Trust Jan 2011

2. Has competition in healthcare increased efficiency?
• Market-oriented approaches health care an important
reform model despite lack of strong theoretical and
empirical support
• In US consolidation in markets has led to questions
about functioning of markets in health care.
• Theoretical support for competition
• Beneficial when prices are regulated
• Anything could happen when they are not
• Implications – need empirical evidence
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3. US picture
• Most evidence from the US
• Where prices are regulated prices competition increases
quality.
• Less clear when there are market determined prices.
• Effects are different across different types of buyers
• US evidence has problem that market structure may be
endogenous to quality
• This makes evidence from policy experiments (the UK!)
very valuable

4. Evidence from the UK
A. The current regime (Propper et al 2010, Cooper et al
2010)
Policy change did bring about changes in demand patterns

5. The location of, and changes in, concentration
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6. Evidence from the UK
A. Evaluation of current regime - regulated prices (Propper
et al 2010)
Impact of reform appears to be positive even with only some patients
exercising choice
• Increase amount of competition in markets
• Good hospitals attract more patients post reforms
• Quality of care risen without increase in expenditure
• Cost benefit analysis – direct impact after 2 years is small, but
effect of moving to more competition could be greater

7. UK empirical support
B. Competition and management (Bloom et al 2010)
• Impact of competition positive
• Better management associated with better outcomes
• Competition leads to better management
C. Analysis of mergers
D. Competition with market determined prices (Propper et al
2006,8)
• Impact of competition negative
• Unobserved quality fell
• Focus on prices and waiting list

8. Negative side effects of current regime
• Under current regime limited so far
• Need more research on equity and selection
• Not necessarily the case that poorer groups don’t get to
exercise choice (e.g. CABG)
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9. Lessons and emerging issues
• Lessons
• Rules of the game matter a lot
• Emerging issues
• Abandonment of price regulation
• Commissioning
• Competition between other types of provider + Role of
vertical integration
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10. References
• Gaynor, Moreno-Serra, Propper (2010). Death by Market Power: Reform,
Competition and Patient Outcomes in the National Health Service.
• Bloom, Propper, Seiler, Van Reenen (2010) – The Impact of Competition on
Management Quality: Evidence from Public Hospitals
• Hall, Propper, Van Reenen (2008). Can Pay Regulation Kill? Panel Data Evidence
on the Effect of Labor Markets on Hospital Performance.
• Burgess, S, Propper, C, Gossage, D, (2008). Competition and Quality: Evidence
from the NHS Internal Market 1991-99. Economic Journal 118:138-170
• Burgess, S, Propper, C, Gossage, D, (2008). Competition and Quality: Evidence
from the NHS Internal Market 1991-99. Economic Journal 118:138-170
• Propper, C, Burgess, S, Green, K, (2004). Does Competition between hospitals
improve the quality of care? Hospital death rates and the NHS Internal Market.
Journal of Public Economics 88: 1247-1272
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