The Operation of Choice and Competition in Healthcare
2020 Public Services Trust, July 2010
This report from 2020 Public Services Trust asks the question “Does either economic theory or empirical evidence suggest that greater competition will improve health outcomes?” The author assesses evidence from the UK, Europe and the US and mainly focuses on the effect of competition between healthcare providers. The report looks at three key elements: the impact of competition between hospitals, the provision and role of information, and how patients are responding to choice. With regard to the empirical evidence available the author highlights how it focuses on “a narrow set of outcomes”, largely the effect of competition on the price and quality of health care. Overall they highlight an emerging consensus that there will be lower cost growth and better outcomes if competition between providers operates with fixed prices.
Impact of competition between hospitals:
- Given the “multi-product nature” of hospitals and the lack of precision in measures of price and quality, they note that the impact of competition on quality and price is “ambiguous”. They also accept that the complex nature of healthcare markets makes it difficult for economic theory to provide clear guidance on whether competition is best.
- They highlight that nearly all empirical evidence on competition comes from the US, arguing that evidence for managed care largely shows that competition operating under fixed prices (at a ‘high enough’ rate) results in improvements in cost and quality. They suggest that results for systems that have competition in both price and quality “are less positive”.
- According to the limited evidence available in the UK, they suggest some evidence shows that the internal market operating in the UK between 1991 and 1997 (where “demanders were sensitive to price” and information on quality was low) was associated with a fall in costs but also a fall in quality (which they suggest is in line with economic theory).
- With regard to more recent UK reforms, the combination of PBR and patient choice, they argue that limited evidence suggests that with fixed costs, competition has improved quality (which they again suggest is in line with economic theory).
Impact of published information on markets and patient response to choice:
- Evidence, again largely from the US, suggests that although provider information is essential if competition is driven by choice, it does not automatically improve outcomes.
- They argue that published data does not have a significant impact on patient decisions, stating that they struggle to understand available information, accompanied by a lack of trust and timely access to the data.
- According to some evidence in the UK, even though some patients “like the idea of choice” their decisions are largely made according to what receives public coverage, such as hospital superbugs, “rather than on clinical measures of quality”.
- The author also highlights that some GPs are “underestimating” their patients and assume they will not want to choose a provider.
In their closing remarks they highlight that recent reforms in the UK are too new to draw solid conclusions on with regard to their impact. They believe there is “clearly an appetite for greater choice” although in reality it is sometimes limited by geography. They argue that the most “obvious policy issue” at the moment is the lack of patient choice across primary care providers.
Trends in emergency admissions 2004-09
Nuffield Trust, 5 July 2010
Blunt, Bardsley and Dixon have examined the growth in emergency admissions over a five-year period and offer some recommendations to alleviate this situation in this new briefing. There were around 1.35 million additional such admissions handled by NHS organisations between 2004 and 2009, equivalent to an 11.8 per cent increase. Moreover the total annual cost to the service from emergency admissions is about £11bn.
The authors cannot identify one particular factor behind this increase. They argue that demographic changes can account for no more than 40 per cent of the rise, based upon the 2004/05 admission rates per age group being applied to the 2008/09 population. The report also highlights that so-called zero bed-day admissions (patients in hospital for less than one day) accounted for 27.2 per cent of emergency admissions in 2008/09, compared to just 20.7 per cent in 2004/05. Any notion that central initiatives such as payment by results and waiting targets have had an impact upon the number of admissions is dismissed.
Among the recommendations put forward by Blunt et al are those discussed below:
- Policy-makers are urged to gain greater awareness about the adverse consequences of poor out-of-hospital care upon the rate of hospital admissions. Initiatives to deliver productive links between hospital and community providers should be piloted.
- Financial incentives should be developed, whether centrally or at a local level, in an attempt to restrict number of unnecessary admissions.
- Regulators should consider including avoidable emergency admissions on the list of undesirable outcome measures for providers.
- Clinicians and managers are advised to undertake a review of existing decision-making processes and evaluate whether initiatives such as more widespread utilisation of primary care doctors in A&E are feasible.
- The achievement of shorter hospital stays should be met with a reduction in bed numbers as opposed to a lowered admission threshold.
- Clinicians and managers should work with patients on actions to reduce the prevalence of ill health in their communities.
A more in-depth report on this issue et al is due to be published by the Nuffield Trust later this month.