In their article they examined the impact of the introduction of a pro-competition policy, in 2006, on hospital outcomes in England. They found strong evidence that under the regulated price regime hospitals within the NHS engaged in activities that increased quality of patient care.
The NHS reforms resulted in significant improvements in mortality and reductions in length of stay without changes in total expenditure or increases in expenditure per patient. .
In 2006 the NHS mandated that all patients requiring treatment be given the choice of five different hospitals (Choose and Book) and adopted a payment system in which hospitals were paid fixed, regulated prices for treating patients (payment by results based, PbR on DGR's). The reform gave patients more choice (via the mandated five alternatives and the end of selective contracting), increased the incentive for hospitals to win business and moved hospitals from a market determined price environment to a regulated price environment.
The introduction of competition can be an important mechanism for enhancing the quality of care patients receive even in a set up where hospitals are not profit maximizers. Attracting patients becomes very important. Given that price is fixed, the only way managers can do this is by undertaking effort to increase quality. The reforms made attracting patients tougher in less concentrated markets and so managers had greater incentives to improve quality in these markets. This increases managerial incentives to improve quality effort as competition grows stronger.
This is one empirical study on "yardstick competition (competence by comparison)" among health care organizations.
Access full article and data sets: Death by Market Power: Reform, Competition, and Patient Outcomes in the National Health Service (2013)
Related post: some controversies about competition in health care
photo: (*) Photosolde
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