This document discusses choice and competition in the UK healthcare system. It provides evidence that: 1) Healthcare markets in England are highly concentrated according to the HHI index, with an average provider HHI over 6000. 2) Concentration levels vary by clinical area, with hips/knees and general admissions being the least concentrated and maternity and CABG the most. 3) Market concentration is influenced by existing supply patterns, relationships between providers/commissioners, and patient willingness to travel - not just the number of providers. 4) Increased consolidation through mergers could enhance market power issues in more concentrated areas like maternity over less concentrated areas like CABG.

1. Is choice and competition
happening and if so where?
Carol Propper
University of Bristol & Imperial College
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2. The choice architecture
• Building blocks in place
– PbR
– PCTs as commissioners; sellers – Trusts, the private
sector
– Regulators: SHAs, Monitor, Carter Commission +
quality regulators
• The model
– Competition in hospital services
– Less clarity about competition elsewhere
• Long term and chronic care
• GP services
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3. Why might we want choice and
competition?
• Responsiveness of service
– Individuals may not want to shop around but do want
personalised service
– Monopolists less likely to be responsive since the
‘only game in town’
• Competition in health care has been shown to
have better outcomes
– Mainly US evidence
• Costs have fallen; Quality – less well established (FTC)
– Dutch agenda
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4. The evidence
• Little hard evidence so far
– Trusts aware of competition for their markets
– Much review and discussion especially in urban areas
– Response will be slow, in part because of lack of
good info
• Is there scope for competition and how
competitive are markets?
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5. Competition: the evidence
• US Department of Justice guidelines on
competition
– Market concentration is a function of the number of
firms in a market and their respective market shares.
– “HHI” index of market concentration.
– Divides market concentration into three regions
• unconcentrated (HHI below 1000)
• moderately concentrated (HHI between 1000 and 1800)
• highly concentrated (HHI above 1800)
– In concentrated markets an increase of 100 points
may be presumed to create/enhance market power
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6. Competition: the evidence
• How concentrated are English health care
markets?
• Examine different products
– maternity (people want to be treated close to home)
– Hips and knees (waiting times important, lots of
providers)
– CABG (few providers, people have to travel)
– All admissions
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9. Competition: the evidence
• English health care markets are concentrated
– Average provider HHI of over 6000
– Lowest in hips and all admissions; higher in maternity
and CABGs
• Concentration is not simply a function of the
numbers of sellers
– For example, maternity (150) as concentrated as
CABG (28)
• Nor is it a function of the number of PCT buying
care from each supplier
– For example, maternity (43) compared to hips (13)
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10. Competition: the implications
• Concentration is a function of
– existing patterns of supply, the relationships between
providers and PCTs (and GPs), and the willingness of
patients to travel
• Mergers could lead to more abuse of market
power in maternity (where there are many
suppliers) than in CABG (where there are few)
• Lots of issues for the Carter Commission!
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11. www.nuffieldtrust.org.uk