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Centre for Market and Public Organisation

Health Care Reform: Evidence and Issues

Carol Propper

Public Service Reform Seminar March 2009

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Recent NHS reforms

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Late 1990s and early 2000s: targets

• Drive to increase quality and efficiency by extensive use of targets

• Examples – waiting times targets for inpatient care (from an initial 18

months!)– 4 hour targets for A and E waits– MRSA and hospital cleanliness– National Service frameworks

• Coronary Heart Disease National Service Framework - information strategy including information needs of patients, carers and the public; health professionals to deliver care; and clinical governance, performance management, service planning and public health.

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2004 onwards: Competition

• Promotion of competition and choice• Components

– Gradual increase in choice of hospitals by patients– Use of private sector to provide care– PbR tariff mechanism

• Accompanying changes in roles– PCTs as commissioners of services, SHAs as strategic market

managers– The Panel on Cooperation and Competition - “The NHS’s own

version of the CC … will provide independent, expert advice on issues arising from this new competition policy” (Bradshaw Sept. 2008)

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Evidence

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Targets: the evidence

• Academic and popular literature stresses negative aspects of targets: “meeting the target and missing the point”

• Lots of anecdotal evidence of gaming• But … looking at waiting lists, the whole picture

and exploiting comparison with Scotland

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Fig 1: Published and unpublished census data

Scotland vs England waiting times

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• Some evidence of ‘managing the lists’ but no evidence of health effects

• Similar results for studies of A and E 4 hour waits

• Why did such targets appear to work?• Features of waiting times

– High visibility politically– Of concern to clinical staff and patients

• Targets may act as ‘missions’ around which employees can focus effort

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Competition: the evidence

• Not much sign so far that competition has changed outcomes e.g. Aberdeen report – Fall in LOS, no impact on quality

• Behaviour has been slow to change in response to PbR– Lack of good costing systems

• But…– Is there scope for competition? How competitive are

markets?

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Competition: the evidence

• US Department of Justice guidelines on competition– Market concentration is a function of the number of

firms in a market and their respective market shares. – “HHI” index of market concentration. – Divides market concentration into three regions

• unconcentrated (HHI below 1000) • moderately concentrated (HHI between 1000 and 1800)• highly concentrated (HHI above 1800)

– In concentrated markets an increase of 100 points may be presumed to create/enhance market power

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Competition: the evidence

• How concentrated are English health care markets?

• Different products – maternity + emergency (people want to be treated

close to home)– Hips and knees (waiting times important, lots of

providers)– CABG (few providers, people have to travel)

• Define self contained markets (E-H) and the extent of concentration within these

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Maternity admissions Emergency admissions

Self contained markets in maternity and emergency

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Hip and knee replacements CABG procedures

Self contained markets in hip and knee and CABG

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 Maternity

admissionsEmergency admissions

Hip and knee replacements

CABG procedures

Number of providers (with at least 50) 157 148 159 30

Herfindahl-Hirschman Index

Mean 6209 6516 3299 1490

Median 6225 6068 1157 992

Mean distance travelled by patient 9.8 14.5 15.0 36.6

Mean number of providers used by a PCT 19.1 6.7 8.4 2.7

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Competition: the evidence

• English health care markets are concentrated• Concentration is not a function of lack of number of

providers– Less competition in maternity and elective where there are lots of

markets and in each a few suppliers are dominant– markets that might be thought to be more competitive because

there are more suppliers (hips + knees) are less competitive than CABG

• Extent of concentration reflects patients’ willingness to travel, which in turn reflects their need and the existing number of suppliers

• Implications – mergers could lead to more abuse of market power in maternity (where there are many suppliers) than in CABG (where there are few)

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The issues

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• Concentration in English health care markets is high – If hospitals seek to merge to avoid competition this

will increase concentration in already concentrated markets

• Lack of competition is not a function of lack of suppliers

• Patient behaviour will have to change to reduce competition or supply will have to increase considerably– Are patients willing to travel more?– Do the PbR tariffs make this profitable?

• Lots of issues for the Carter Commission!