Centre for Economic Performance (CEP)

Abstract for:

Does Hospital Competition Improve Efficiency? An Analysis of the Recent Market-Based Reforms to the English NHS

Zack  Cooper,  Steve  Gibbons,  Simon  Jones,  Alistair  McGuire,  June 2010
Paper No' CEPDP0988: | Full paper (pdf)
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Keywords: Hospital Competition; Market Structure, Prospective Payment, Incentive Structure

JEL Classification: C21; I18; L1; R0

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
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This paper uses a difference-in-difference estimator to test whether the introduction of patient choice and hospital competition in the English NHS in January 2006 has prompted hospitals to become more efficient. Efficiency was measured using hospitals’ average length of stay (LOS) for patients undergoing elective hip replacement. LOS was broken down into its two key components: the time from a patient’s admission until their surgery and the time from their surgery until their discharge. Our results illustrate that hospitals exposed to competition after a wave of market-based reforms took steps to shorten the time patients were in the hospital prior to their surgery, which resulted in a decrease in overall LOS. We find that hospitals shortened patients’ LOS without compromising patient outcomes or by operating on healthier, wealthier or younger patients. Our results suggest that hospital competition within markets with fixed prices can increase hospital efficiency.