John Appleby - Competition in the NHS: Good or bad (or something else)?

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John Appleby speaks at our press breakfast event on competition, 'Will competition be a help or a hindrance?'

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John Appleby - Competition in the NHS: Good or bad (or something else)?

  1. 1. Competition in the NHS: Good or bad (or something else)? John Appleby Chief Economist The King’s Fund September 2013 Improving health care in London: who will take the lead?Improving health care in London: who will take the lead?
  2. 2. • Ever since Adam Smith developed the concept of the invisible hand, many people have assumed that the discipline of economics is synonymous with the study of competition and markets, and that economists promote the notion of competition as the principal mechanism for improving social welfare. • However, only a few zealots now adhere absolutely to the belief that competition offers an unalloyed solution to society’s more intractable problems. Prof Pete Smith Market mechanisms and the use of health care resources, OECD, 2009 Markets and competition are not (always) the answer
  3. 3. Non-market allocation systems are not (always) the answer • Alternatives to markets/competition do not always and everywhere inexorably lead to the best use of scarce resources or services responsive to patients. The interests of ‘the system’, its bureaucrats and professional providers, may dominate over those of the patient. • But if – amongst other things - we want to improve efficiency, patient responsiveness and promote innovation, as well as ensure the effective delivery of public goods such as R&D and medical education and ensure an acceptable degree of equity in a complex system of imperfect information, what allocation mechanisms should we use? • The difficult policy question is not ‘what works?’ but as Pete Smith has noted, ‘what works in what situation?’
  4. 4. Competition, help or hindrance? What’s the evidence? • Thinking without data can be useful. It’s pretty clear without the need for much evidence for instance that markets are probably poor at delivering some of the things we want from health care – such as universal access. • But economics is dominated by empirical analysis which tries to find out how/why things work, to (sometimes) make forecasts and predictions, to evaluate one policy action against another and so on. • A big problem is getting hold of the data and conducting rigorous experiments – not economists’ unwillingness to do so. • Over the last near-quarter of a century there have been many efforts to evaluate the use of market mechanisms in the English NHS…..
  5. 5. Study Subject/Title Main findings Glennerster, Matsaganis, Owens (1994) GP Fundholding Implementing Fundholding: WildCard or Winning Hand? ‘Fundholders provided more outreach services than non-fundholders did. Also, fundholders, obtained quicker admission for their patients and, generally, better response from providers. (Le Grand, 1999) Harris and Scrivener (1996) GP Fundholding Fundholders’ Prescribing Costs: The First FiveYear Fundholders on average had lower prescribing costs. Söderlund et al, 1997 1991 reforms and productivity Impact of the NHS reforms on English hospital productivity: an analysis of the first three years ‘..greater competition was associated with lower costs.’ (Propper, Wilson, Burgess (2005)) Propper et al, 1998; GP Fundholding The effects of regulation and competition in the NHS internal market: the case of general practice fundholder prices ‘..hospitals that had greater business from fundholders had lower posted prices.’ (Propper, Wilson, Burgess (2005)) Le Grand, 1999 Review Competition, Cooperation, or Control? Tales From The British National Health Service ‘Perhaps the most striking conclusion to arise from the evidence is how little overall measurable change there seems to have been.’ Croxson et al, 2001 GP Fundholding Do doctors respond to financial incentives? UK family doctors and the GP fundholder scheme ‘Fundholders were able to secure shorter waiting times for their patients.’ Propper, Wilson, Burgess (2005) Propper, Croxson and Shearer, 2002 GP Fundholding Waiting times for hospital admissions: the impact of GP fundholding ‘Fundholders were able to secure shorter waiting times for their patients.’ Propper, Wilson, Burgess (2005) Propper, Burgess and Abraham, (2002) Review Competition and quality: evidence from the NHS internal market 1991-1999 ‘..quality – as measured by deaths of patients admitted to hospitals with heart attacks – fell during the internal market.’ (Propper, Wilson, Burgess (2005)) Propper, Wilson, Burgess (2005) Review Extending Choice In English Health Care: The implications of the Economic Evidence ‘..there is neither strong theoretical nor empirical support for competition, but that there are cases where competition has improved outcomes.’ Smith (2009) Review Market mechanisms and the use of health care resources. ‘..competition can take many different forms, and sharpening competitive forces is likely in general to be an important tool for most health systems. Policy makers nevertheless need to shape market-type mechanisms with care, to align other policy levers, and to monitor vigilantly, in order to maximise the benefits they secure.’ OHE (2012) Review Competition in the NHS ‘Competition is potentially useful to stimulate the provision of better quality and more health care for the NHS’s budget beyond what is possible in the absence of competition. But this does not mean that competition is desirable or feasible for all NHS services in all locations.’ Study Years studied Main findings Treatment Control Propper et al (2004) 1995/6 - 1997/8 None Increasing competition from 25th to 75th percentile increased mortality rates by 1% Propper et al (2008) 1992/3 - 1996/7 1991/2, 1997/8 - 1999/2000 Hospitals exposed to competition increased elective admissions and decreased waiting times but had increased mortality. Overall effect was to save 1.32 million person months of waiting and lose around 11,800 life years due to earlier death. Costs exceeded benefits on any reasonable valuation. Cooper et al (2011) April 2006 - December 2008 Jan 2002 - March 2006 A one standard deviation increase in competition led to a 0.31% fall in mortality annually between April 2006 and December 2008 off a 2005 baseline of 13.96%. Overall effect was about 300 fewer deaths from AMI per year Gaynor et al (2011) 2007/8 2003/4 A 10% fall in the HHI [a measure of market concentration] decreases AMI mortality rates by 2.91% and all cause mortality rates by 0.99%. This implies a 0.3% decrease in the average hospital’s mortality rate, or around 4,800 life years saved. Bloom et al (2011) 2005/6 None Adding a rival hospital increases management quality by 0.4 standard deviations and decreases mortality rates by 9.5% Bevan and Skellern Does competition between hospitals improve clinical quality? A review of evidence from two eras of competition in the English NHS (2011) Studies and reviews: 1994-2012
  6. 6. 2012 2008 2006 2000 2008 Hospitals exposed to competition increased elective admissions and decreased waiting times… …but had increased mortality. 1994 Fund holders provided more outreach services than non-fund holders and obtained quicker admission for their patients and, generally, better response from providers . 1997 Greater competition was associated with lower costs. 1998 Hospitals that had greater business from fund holders had lower posted prices.1996 Fund holders on average had lower prescribing costs. 1999 Perhaps the most striking conclusion is how little measureable change there seems to have been 2001 Fund holders were able to secure shorter waiting times for their patients. 2002a Fund holders were able to secure shorter waiting times for their patients 2002b Quality – as measured by deaths of patients admitted to hospitals with heart attacks – fell during the internal market 2005 There is neither strong theoretical nor empirical support for competition, but that there are cases where competition has improved outcomes 2009 Sharpening competitive forces is likely in general to be an important tool for most health systems. Policy makers nevertheless need to shape market-type mechanisms with care, to align other policy levers, and to monitor vigilantly, in order to maximise the benefits they secure 2012 Competition is potentially useful to stimulate the provision of better quality and more health care for the NHS’s budget beyond what is possible in the absence of competition. But this does not mean that competition is desirable or feasible for all NHS services in all locations.2004 Increasing competition from 25th to 75th percentile increased mortality rates by 1% 2011 Adding a rival hospital increases management quality by 0.4 standard deviations and decreases mortality rates by 9.5% 2011 A 10% increase in competition = 0.3% decrease in the average hospital’s mortality rate, or around 4,800 life years saved 2011 Overall effect was about 300 fewer deaths from AMI per year 1994 1996 1998 2014 2002 2004 Key findings from selected studies and reviews of competition and the English NHS 2010
  7. 7. What to conclude? • Some evidence of some benefits under some organisational, contractual, payment/price and regulatory arrangements. • Don’t know if competition cost effective or the exact combination and design of contractual, informational, institutional and payment arrangements which makes benefits of competition > its costs or that would imply a policy response to increase competition in areas where there is currently little competition. • Julian LeGrand: “Perhaps the most striking conclusion is how little measureable change there seems to have been”. Smith…perhaps due to constrained/regulated input markets (for drugs, medical labour, capital etc)? Or, choice in main market constrained (England has far fewer hospitals than most other OECD countries per capita)? What are policy responses – deregulate input markets? Build more, smaller hospitals, break up big ones? • Or just don’t expect too much from markets and competition?
  8. 8. Finally… • Markets worth experimenting with - but need careful design, monitoring and evaluation (and abandoning/modifying where they don’t give us what we want) • Markets just one of the levers to get what we want for health care • More research needed….
  9. 9. Thank you @jappleby123

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