1. “The impact of competition and
organisational integration on
cost and quality”
Carol Propper
Imperial College London
Nuffield trust and Monitor
September 2011

2. Preliminaries
• Competition on the insurance side and/or on the provision
side
• Focus on latter
• Theory of competition on supply side – competition will
increase quality if prices are regulated (similar to schools),
anything can happen if prices not regulated
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3. Empirical evidence from USA
• General consensus that where prices are regulated,
competition has increased quality (and lowered growth in
expenditure)
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4. Evidence from UK
1. Blair reforms – choose and book + PbR
• Not everyone has exercised choice (Dixon et al Kings Fund)
• Hospitals that were better pre policy attracted more patients and
drew patients from more neighbourhoods
• In hospitals exposed to more competition
• Quality has risen
• Length of stay has fallen
• No increase in expenditure at hospital level
• No evidence of increase in inequalities (Cookson and Laudicella
2010)
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5. Evidence from UK
2. Management in NHS hospitals
• Better management is associated with a range of better
outcomes (quality, financial performance, waiting times,
staff satisfaction and regulator ratings)
• Management is better in hospitals in competitive areas
(Bloom et al 2010)
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6. Evidence from UK
3. Evidence from hospital consolidation
• US experience – consolidations raise prices, have mixed impact on
quality, reduce costs only slightly (Vogt 2009)
• UK experience - little researched
• 1997 onwards - wave of hospital reconfigurations
• Over half of acute trusts involve in a reconfiguration with another
trust
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7. Location of merged and unmerged hospitals
(pre merger)
NHS Acute Hospitals
Never merged (109)
Merged (106)
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8. Evidence from U.K
3. Evidence from hospital consolidation (cont.)
• Analysis of Impact
• Event study: hospital performance before and after merger are
compared
• Comparison data from same period for ‘control’ group of non
merging hospitals
• Results indicate consolidation led to
• Lower growth in admissions and staff numbers but no increase in
productivity
• No evidence of reduction in deficits
• No evidence of improvement in quality
• Costly to bring about with few visible gains
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9. Summary
• Competition has been beneficial in UK under Choose and
Book regime + PbR
• Old style planning does not seem to bring large gains
• Many areas not investigated to date (e.g. GP competition;
networks)
Thank you
© Imperial College Business School

10. References
• Propper, C, Burgess, S, Gossage, D (2008) Competition and
Quality: evidence from the NHS Internal Market 1991-99.
Economic Journal 118, 138-170.
• Gaynor, M, Moreno Serra, R and Propper, C (2010) Death By
Market Power: reforms, competition and the NHS.
http://www.bristol.ac.uk/cmpo/publications/papers/2010/wp242.pdf
• Nicholas Bloom, Carol Propper, Stephan Seiler and John van
Reenan (2010) The Impact of Competition on Management
Quality: Evidence from UK Public Hospitals. NBER WP 16032
• Vogt, W (2009) Hospital Market Consolidations. Washington:
NIHCM Foundation
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