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Elaine Kelly: Growth in NHS-funded elective care
1. Introduction Background Results Mechanisms Conclusions
More hips, please. Independent sector provision and the
growth in NHS-funded elective care
Elaine Kelly & George Stoye
Nueld Trust Workshop
13th September 2013
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2. Introduction Background Results Mechanisms Conclusions
Introduction
The past decade of health care policy reforms have increased the role of
competition in NHS-funded care.
Existing work has concentrated on the patient choice reforms of 2006
and 2008. [Cooper et al, 2011; Gaynor et al, 2012 a,b]
This paper focuses on a separate but related set of reforms that
increased the access of independent sector providers (ISP) to markets for
NHS-funded elective secondary care.
How did this aect the market for both NHS and privately funded hip
replacements?
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3. Figure : Total number of NHS-funded hip replacements in England, by provider type
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
HipReplacements
Financial Year
ISP NHS Trusts
The total number of NHS-funded hip replacements increased by 40% between
2003/04 and 2010/11.
After 2006/07, most of this growth is accounted for by ISPs.
4. Figure : Mean hip NHS-funded replacements per Middle Super Output Area by
nearest provider type in 2010/11
6
6.5
7
7.5
8
8.5
9
9.5
10
10.5
11
2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11
MeanhipreplacementsperMOSA/year
NHS ISP
Growth was fastest in areas where an ISP was located closer than the nearest NHS
trust by 2010/11.
5. Introduction Background Results Mechanisms Conclusions
Research Questions
How did the introduction of ISPs aect the market for NHS-funded hip
replacements?
1 Why did the number of hip replacements increase faster in areas where
ISPs were located relatively close by?
2 What explains the increase in the number of NHS-funded hip
replacements?
New procedures
Substitution from privately funded procedures
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6. Introduction Background Results Mechanisms Conclusions
Independent Sector Provider reforms
1 Independent Sector Treatment Centres (ISTCs)
First introduced in 2003, expanded in 2006.
Privately owned but typically treat just NHS-funded patients.
Objectives [Naylor Gregory, 2009]:
Wave 1: to address capacity constraints and reduce waiting times
Wave 2: increasing competition for NHS providers, providing more choices
for patients, and fostering innovation.
2 Any Qualied Providers (AQPs)
In mid 2007, choice of providers in orthopaedics expanded to cover
existing facilities, such as private hospitals, through the Extended Choice
Network.
Treat privately funded and NHS-funded patients.
Extended to other specialties when 2nd choice reform was introduced in
2008.
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7. Figure : NHS-funded hip replacements conducted by ISPs, by quarter and ISP type
0500100015002000
NumberISPHipProcedures
2003q2
2004q2
2005q2
2006q2
2007q2
2008q2
2009q2
2010q2
2011q2
Time
ISTC sites AQP sites
ISTC volumes started to increase as ISTCs began to open. Levelled o after 2008.
AQP volumes increased rapidly after the second choice reform was introduced.
8. Figure : Number of ISP sites by year and ISP type
0
20
40
60
80
100
120
Sites 1 pat Sites 20 pats Sites 1 pat Sites 20 pats
ISTC AQP
NumberofISPSites
2003/4
2004/5
2005/6
2006/7
2007/8
2008/9
2009/10
2010/11
More AQP sites, but ISTC procedures more concentrated across sites.
In 2010/11, average NHS-funded hip replacements per site were 65 for AQPs and
160 for ISTCs.
9. Figure : Mean number of hip replacements per MSOA/year, by nearest provider
type in 2010/11
6
6.5
7
7.5
8
8.5
9
9.5
10
10.5
11
2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11
MeanhipreplacementsperMSOA/year
Financial Year
NHS ISTC AQP
Relative growth is much faster in areas where an ISTC is the nearest provider than
where AQPs are the nearest provider.
Shift in entire distribution, not just the mean.
10. Introduction Background Results Mechanisms Conclusions
Why might introducing ISPs aect the number of
NHS-funded procedures?
1 Supply: extra potential capacity relaxes supply constraints.
An initial objective of the ISTC programme [Naylor Gregory, 2009]
2 Demand: ISPs provide an option that potential patients prefer to:
1 No procedure.
2 Privately funded treatment
This paper focuses on establishing whether there was a demand response.
Diculty: all areas/patients can access ISPs through the 2008 choice
reforms.
Solution: exploit variation in intensity of treatment or exposure by
relative distance between the nearest ISP and the nearest NHS trust.
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11. Introduction Background Results Mechanisms Conclusions
Why does the growth rate of hip replacement vary by
distance to ISP?
1 Endogenous placement: ISPs located in areas where higher growth is
anticipated/removing supply constraints
2 A demand response:
Patients prefer treatment closer to home [Beckert et al, 2012; Sivey 2012].
Analysis examines ISP placement and the number of hip replacements at
the Middle Super Output Area (MSOA) level.
Data on NHS-funded hip replacements from the inpatient Hospital
Episode Statistics (HES).
6,710 MSOAs in England (ave pop 7,200). MSOAs are a statistical
construct, no administrative jurisdictions.
Dene MSOA as treated if there is an ISP that performs hip
replacements nearer than the NHS trust.
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12. Introduction Background Results Mechanisms Conclusions
What are the determinants of ISP placement?
The odds of MSOA m having an ISP closer than the nearest NHS trust in
2010/11 is given by the following specication:
ISPclose10m = θo +θ1WaitTimesm +θ2nTrustm +θ3SDm +em (1)
WaitTimesm includes waiting times of nearest trust and residents of the
MSOA, and MSOA admittances for hip replacements in 2003/04.
nTrustm are characteristics of the nearest trust to MSOA m; SDm are
socio-demographic characteristics (all pre 2005)
Results aim to indicate:
The extent to which ISP placement reects population need/supply
constraints
Any sources of random variation in placement that could be used for
identication
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13. Table : Odds of having an ISP closer than the nearest NHS trust in 2010/11
Type of ISP Closer than the Nearest Trust
ISP ISP ISP ISTC only AQP only
(1) (2) (3) (4) (5)
Nearest Trust Wait Time 2003 (SD) 1.352*** 1.195** 1.141 1.284 1.124
(0.102) (0.0900) (0.117) (0.272) (0.128)
MSOA Wait Time 2003 (SD) 0.983 0.963 0.943 0.927 0.955
(0.0356) (0.0355) (0.0451) (0.0742) (0.0493)
Average hip replacements in 2003 and 2004 0.972* 0.927*** 0.939** 1.013 0.938**
(0.0159) (0.0176) (0.0242) (0.0370) (0.0257)
Distance to Nearest Trust (km) 1.120*** 1.078*** 1.054 1.064**
(0.0270) (0.0294) (0.0408) (0.0300)
Distance to Nearest Trust Squared (km) 0.997*** 0.998** 0.999 0.999
(0.000760) (0.000768) (0.000941) (0.000789)
IMD score (2004) 0.967*** 0.976 1.063*** 0.941***
(0.0117) (0.0179) (0.0185) (0.0198)
Private hospital closer 29.25*** 3.573*** 33.56***
(7.843) (1.292) (9.935)
NHS `hospital' (30 beds) closer 2.028*** 2.146*** 1.915***
(0.384) (0.624) (0.386)
Nearest trust Socio-demographics No Yes Yes Yes Yes
Observations 6,710 6,710 6,710 6,710 6,710
Pseudo R-squared 0.0127 0.0731 0.404 0.119 0.413
Notes: *** denotes signicance at 1%, ** at 5%, and * at 10% level. Observations are at the MSOA level.
Presence of existing hospital facilities is strongest determinant of ISP location
Adding PCT FE strengthens relationship with private hospital location. (OR increases
to 9.6 in col 4 and 138.7 in col 5)
14. Introduction Background Results Mechanisms Conclusions
Estimating a demand response
Within PCTs, relative distance to an ISP should not aect hip
replacement numbers through supply.
Placement related to nearest trust waiting times but not MSOA waiting
times (not related to local pre-existing need).
Administrative constraints should operate at PCT level, not MSOA level.
However, relative distance to an ISP should aect patient demand.
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15. Table : Treatment and Control Group Denitions
Financial % MSOA % of MSOA hip rep % ISP pats
Year ISP close conducted by ISPs live close
ISP closer ISP Further
2003/4 2.7 1.1 0.1 35.0
2004/5 7.3 2.4 0.9 16.2
2005/6 8.6 3.9 1.9 17.9
2006/7 3.6 13.8 3.2 17.4
2007/8 12.8 13.8 5.6 29.2
2008/9 19.4 18.1 8.5 36.5
2009/10 22.3 17.7 10 36.8
2010/11 28.2 24.4 14.1 45.2
The proportion of areas treated by an ISP increases as more ISPs open
Patients are more likely to receive care from an ISP if they live in treated areas.
But, most ISP patients do not live in treated areas.
16. Introduction Background Results Mechanisms Conclusions
Fixed Eects Specication
Number of residents in MSOA m that receive a NHS-funded hip
replacement (conducted by an NHS trust or an ISP) in year t:
Hipsmt = α +βISPmt +γm + µt +Xmt +εmt (2)
The coecient of interest is β, the eect of introducing an ISP close to
MSOA m on number of residents admitted for NHS-funded hip
replacements.
Xmt includes time varying MSOA measures of population age
composition, admissions for fractured neck of femur, and the
unemployment rate. εmt clustered at the PCT level.
Identifying assumption: conditional on Xmt, ISPmt uncorrelated with εmt.
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17. Table : Fixed eects estimates of the impact of ISP introduction on number of
admittances for elective hip replacements per MSOA
Type of ISP Closer: ISP ISTC AQP ISTC20 AQP20
(1) (2) (3) (4) (5)
ISP closer than nearest NHS Trust 0.222** 0.447 0.174* 1.189*** 0.825***
(0.0983) (0.326) (0.0976) (0.392) (0.168)
Pop 65-79 (thousands) 9.838*** 9.860*** 9.866*** 9.423*** 9.579***
(0.867) (0.863) (0.867) (0.860) (0.864)
Pop 80+ (thousands) 9.806*** 9.815*** 9.818*** 9.695*** 9.721***
(1.253) (1.255) (1.256) (1.256) (1.264)
FNOF admits 0.0581*** 0.0579*** 0.0581*** 0.0582*** 0.0586***
(0.0161) (0.0161) (0.0161) (0.0162) (0.0162)
FNOF admits squared -0.00377*** -0.00375*** -0.00376*** -0.00378*** -0.00377***
(0.00123) (0.00124) (0.00123) (0.00123) (0.00123)
Unemployment Rate -8.207 -8.176 -8.214 -9.216 -9.151
(6.126) (6.115) (6.134) (6.037) (6.082)
Year Fixed Eects Yes Yes Yes Yes Yes
MSOA Fixed Eects Yes Yes Yes Yes Yes
Demographics Yes Yes Yes Yes Yes
Observations 46,970 46,970 46,970 46,970 46,970
R-squared 0.121 0.121 0.121 0.123 0.124
Notes: *** denotes signicance at 1%, ** at 5%, and * at 10% level. Observations are at the MSOA year level. The dependent
variable in all columns is the number of admissions for an NHS-funded elective hip replacement amoungst MSOA residents.
18. Introduction Background Results Mechanisms Conclusions
Summary
The introduction of ISPs is associated with an increase in demand for
hip replacements.
For large ISPs introduced nearer than the nearest trust, ISTCs add 1.2
and AQPs 0.8 to annual hip replacements per MSOA.
Relative to a baseline level of hip replacements in 2003/04 of 7.
Equivalent to adding an additional 100 people aged 65+ to the MSOA
population.
Propensity score matching estimates provide a similar set of results.
Potential to use location of existing health care facilities as an IV.
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19. Introduction Background Results Mechanisms Conclusions
Where is the additional demand for NHS treatment coming
from?
The increase in demand for hip replacements may operate through:
A rise in the number of people having hip replacements
Substitution from privately funded to NHS-funded hip replacements
Combine HES with hospital level data from the National Joint Registry
(NJR), to estimate relationships between NHS, ISP and private pay
volumes.
Caution: much more work needed on separating demand from supply.
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20. Introduction Background Results Mechanisms Conclusions
Data Construction I
HES contains:
Number of patients treated in NHS hospitals
Number of NHS-funded patients treated in AQPs and ISTCs.
NJR contains:
Number of patient treated in NHS hospitals
Total number of patients treated in private hospitals, including those
operating as AQPs and ISTCs.
Private patients = Hip replacements in private hospitals (NJR) − hip
replacements conducted at ISTCs (NJR)− NHS-funded hip replacements
conducted by AQPs (HES)
Note: measurement error in the number of private procedures.
will be improved with access to patient level data (agreed in principle).
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21. Introduction Background Results Mechanisms Conclusions
Data Construction II
The NJR has no information on where patients live, therefore assign
patients to areas on the basis of hospital location.
Collapse number of procedures by provider type and NHS/private pay by
Primary Care Trust and nancial year.
Use data from 2007/08 to 2010/11, due to concerns about quality of
data in earlier years.
Drop negative private pay volumes.
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22. Introduction Background Results Mechanisms Conclusions
NJR-HES Sample
Table : PCTs that contain Independent Sector Providers and estimated privately
funded hip procedures 2007/08 to 2010/11
PCTs with ISPs No of hip reps on private sites
ISTCs AQPs All NHS-funded Est pr pay
NJR HES NJR HES
2007/8 14 31 18,387 4,222 14,165
2008/9 19 48 22,198 6,794 15,404
2009/10 20 60 21,511 7,830 13,681
2010/11 22 77 22,975 11,665 11,310
Private hospitals treated more patients in 2010/11 than 2007/08.
Increased numbers of NHS-funded patients compensated for falls in private pay
patients.
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23. Introduction Background Results Mechanisms Conclusions
Estimation
Private pay hip replacements and ISTCs
We assume that the supply of ISTC hips is determined by the ISTC
contract and therefore does not respond to private pay volumes.
Private pay hip operations in PCT p and nancial year t is given by:
PPHipspt = α +ρISTCpatspt +γp + µt +Zpt +εpt (3)
Private pay hip replacements and AQPs
We assume that private hospitals strictly prefer to treat private patients
over NHS-funded patients because they receive more for their care.
AQPpatspt = α +σPPHipspt +γp + µt +Zpt +εpt (4)
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24. Table : Fixed eects estimates of the impact of ISP introduction on number of
admittances for elective hip replacements per PCT of treatment
Priv Funded Ops AQP NHS Ops NHS Trust Ops
(1) (2) (3) (4) (5) (6)
HES ISTC hips -0.155 -0.149 -0.147** -0.144**
(0.0995) (0.0958) (0.0628) (0.0618)
Est private pay hips -0.664*** -0.338***
(0.141) (0.0842)
HES AQP hips -0.0749 -0.207*
(0.0653) (0.109)
Sample All Balanced All Balanced All Balanced
PCT Year FE Yes Yes Yes Yes Yes Yes
Age Composition Yes Yes Yes Yes Yes Yes
Observations 515 484 515 484 532 520
R-squared 0.112 0.165 0.664 0.484 0.043 0.052
Number of PCTs 135 121 135 121 136 130
Notes: *** denotes signicance at 1%, ** at 5%, and * at 10% level. Observations are at the PCT year level.
Strong evidence of substitution between private pay and AQP procedures, but not
between private pay and ISTC procedures.
Small negative eects of ISTC and AQP procedures on NHS trust procedure numbers
25. Introduction Background Results Mechanisms Conclusions
Summary
Number of NHS-funded hip replacements increased by 40% between
2003/04 and 2010/11, with ISPs accounting for almost two-thirds of the
rise.
Hip replacements increased faster in areas that were closer to an ISP
than the nearest NHS trust.
Fixed eects and matching estimates suggest that this was consistent
with a demand response.
Data on private pay patients from the NJR indicates strong evidence of
substitution between private pay and NHS-funded AQP procedures.
Consistent with private hospitals treating NHS patients to help
compensate for a decline in demand from private patients.
Increases in ISTC and AQP procedures tend to reduce procedures
conducted by NHS trusts.
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26. Introduction Background Results Mechanisms Conclusions
Implications
1 For patients
ISPs contributed two-thirds of the total increase in hip replacements,
contributing a substantive increase in supply.
Patients beneted more in areas located nearer to an ISP than the
nearest trust.
2 For ISPs
ISTC sites provided an unambiguous increase in revenue, as there is not
much evidence of substitution
For AQPs, NHS-funded patients have compensated for falls in demand
from private patients.
In the long run could ISPs crowd out private pay patients?
3 For NHS trusts.
There is some evidence that ISP operations led to a fall in NHS trust
operations.
Unclear what this means for NHS trust nances, given likely substitution
to other activity.
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27. Introduction Background Results Mechanisms Conclusions
Future Work
Add data from 2011/12 and 2012/13.
Patient level data from the National Joint Registry (removing the need
to estimate private pay patients).
Use the presence of existing health care facilities as an instrument for
ISP location.
More theoretical and empirical work separating the supply of health care
from demand for health care.
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