Competition and Equity in Health Care: The English Experience

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Competition and Equity in Health Care The
English Experience
Richard Cookson Centre for Health
Economics University of York


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Three Doses of Hospital Competition in the
English NHS

• Thatcher/Major
• 1991-7

Blair/Brown 2003-10
Cameron/Clegg/ Lansley 201?-??
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Source 2011 Commonwealth Fund International
Health Policy Survey of Sicker Adults in Eleven
Countries
Final samples Australia 1,500, Canada 3,958,
France 1,001, Germany 1,200, Netherlands 1,000,
New Zealand 750, Norway 753, Sweden 4,804,
Switzerland 1,500, United Kingdom 1,001, and
United States 1,200
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And in the first survey, in 1998
Percent reporting AUS CAN NZ UK US
Financial problems paying medical bills 10 5 15 3 18
Not filling prescriptions due to cost 12 7 15 6 17
Did not get needed care due to financial reasons 10 2 25 3 53
Spent more than 750 out-of-pocket for medical care in the past year 19 10 11 1 29
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Historical and longitudinal small area analysis
of the effects of market-oriented reform on
equity of access to NHS care from 1991 to 2001
Project duration July 2006 to June 2007 Funding
body ESRC Public Services Programme Co-investiga
tors Richard Cookson and Mark Dusheiko Consultan
ts Geoffrey Hardman, Paul Chalmers-Dixon,
Stephen Martin, and Alan Maynard



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Project title Effects of health reform on health
care inequality Funded by NHS NIHR Service,
Delivery and Organisation ProgrammeManaged
by DH PRP Health Reform Evaluation
Programme Project duration 1 April 2007 - 31
October 2010 Lead investigator Richard
Cookson Data analysis Mauro Laudicella and Paulo
Li Donni Advisory input James Carpenter, Roy
Carr-Hill, Diane Dawson, Mark Dusheiko, Hugh
Gravelle, Geoffrey Hardman, Russell
Mannion, Steven Martin, James Nelson-Smith,
Andrew Street Special thanks George Leckie and
Carol Propper
Department of Social Policy and Social Work The
York Management School Department of Economics
and Related Studies
Yorkshire Humber Public Health Observatory
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Concerns that competition may undermine equity
The availability of good medical care tends to
vary inversely with the need for it in the
population served. This inverse care law operates
more completely where medical care is most
exposed to market forces, and less so where such
exposure is reduced. Dr Julian Tudor-Hart,
1971 (The Lancet)
The commercialization of health care is the
primrose path down which inexorably lies American
medicine first-rate treatment for the wealthy
and 10th-rate treatment for the poor. Dr David
Owen, 1989 (Quoted as leader of the opposition
Social Democratic Party)
Allowing private providers to compete for NHS
business will exacerbate the inverse care law,
because most profit can be made in more affluent
healthier groups. Margaret Whitehead, Barbara
Hanratty and Jennie Popay, 2010 (The Lancet)
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A behavioural economic hypothesis

• Hospital competition erodes the pro-social
  motivation of hospital staff
• Related to but not quite the same as solidarity
  ( pro-social motivation of citizens)
• So hospital managers and doctors more likely to
  respond to incentives for selecting against
  unprofitable patients and services
• Socioeconomically disadvantaged patients tend to
  be less profitable, because they tend to have
  more numerous and serious co-morbidities and to
  stay longer in hospital

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NHS Internal Market 1991-7
Cookson, R, Dusheiko, M, Hardman, G, Martin, S.
(2010). Competition and Inequality Evidence from
the English National Health Service 1991-2001.
Journal of Public Administration Research and
Theory 20 i181-i205.
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NHS Internal Market 1991-7

• Single payer tax-funded NHS
• State funded, state owned NHS hospitals
  responsible for 90 hospital expenditure
• Price competition driven by local public payers
• Payers Health Authorities and GP Fundholders
• Providers NHS Hospital Trusts
• Weak incentives (entry exit barriers)
• Poor information on quality
• Evidence of small competition effects
• Lower hospital costs (Propper and Soderlund 1998)
• Higher AMI death rates (e.g. Propper et al. 2004)

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Quasi-Experimental Method

• Deprivation related inequality in small area
  hospital utilisation from 1991 to 2001
• Hip replacement, coronary revascularisation
• Indices of potential competition
• e.g. number of hospitals within 20km
• Inequality difference between more and less
  potentially competitive markets
• Differences-in-difference as competition is
  phased in from 1991 and out from 1996

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Hip replacement rates per 100,000 population by
competition and deprivation
Notes 1. Non-competitive refers to wards in
the most concentrated third of local hospital
markets in 1994 based on number of Trusts within
20km, and competitive refers to all other
wards. 2. Deprived refers to the most deprived
fourth of wards by Townsend score, and
non-deprived refers to all other wards.
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Blair/Brown NHS Reforms 2001-8
Cookson R, Laudicella M, Li Donni P. Does
hospital competition harm equity? Evidence from
the English National Health Service. Centre for
Health Economics, University of York, CHE
Research Paper 66. www.york.ac.uk/che/news/che-re
search-papers-66-67/
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Blair/Brown NHS Reforms

• Sustained spending growth
• Real annual UK NHS expenditure growth averaged
  6.56 from 1999/00 to 2010/11 compared with 3.48
  from 1950/51 to 1999/00
• Hospital reform
• Target driven performance management focusing
  especially on hospital waiting times
• Re-introduction of competition

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Pro-competition elements of reform

• Fixed price hospital payment (English HRGs)
• Piloted 2003/4 and fully implemented 2005/6
• Patient choice of hospital
• Choice of 4-5 providers from December 2005
• Free choice from 2008
• Independent Sector (IS) entry
• ISTC programme share of overall NHS funded
  non-emergency activity grew from 0.02 in 2003/4
  to 2.2 by 2008/9 (HES data)
• 11.94 for hip replacement, 5.29 for cataract
• Plus a substantial but unknown volume of
  sub-contracted IS activity

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Hip replacement length of stay(allowing for
other patient characteristics and hospital
effects)
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Market Concentration in England
2008
2003
NHS Hospital Elective admissions
Independent Sector Elective admissions
HHI Index
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Did market concentration fall?Yes, a bit -400
HHI pts (6.8)
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Quasi-Experimental Method

• Basic regression design difference-in-difference
• Compare the deprivation-utilisation gradient
  between more and less concentrated hospital
  markets, before and after competition is
  introduced in 2005
• Time varying controls for population size,
  age-sex structure, disease prevalence,
  independent sector supply
• Improvement 1 Continuous treatment variable
• Avoids arbitrary split into groups.
• Improvement 2 Year-by-year pattern of
  differences
• Expect gradual change as competition is phased in
• Improvement 3 Fixed effects
• Measure the dose of competition using change in
  actual market concentration, rather than the
  baseline level.
• Improvement 4 Predicted market concentration
  index
• Predict market concentration using exogenous
  variables, to address potential endogeneity bias
  in models based on actual market concentration.

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Non-emergency Inpatient Admissions By Dispersion
and Deprivation
Non-deprived catch up in less competitive
markets
Affluent areas catching up in less competitive
markets
Parallel growth in more competitive markets
Parallel growth in more competitive markets

• High dispersion refers to areas with HHI in
  2003 lt 5,000 (34.3 of areas)
• Deprived refers to areas with income
  deprivation gt 20 (27.8 of areas)

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Main Finding

• No evidence that competition undermined
  socioeconomic equity in health care
• If anything, the opposite deprived small areas
  experienced slightly faster growth relative to
  non-deprived small areas in dispersed (i.e.
  potentially more competition) markets
• However, this effect so small as to be
  economically unimportant

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Overall Conclusions

• Hospital competition in the English NHS in the
  1990s and 2000s had little or no effect on
  socio-economic equity in health care
• Concerns about harmful equity effects proved to
  be exaggerated
• However, doses of competition were small
• Strong barriers to entry and exit
• Independent sector entry lt 2.5 activity
• Public hospitals still tightly controlled