Propper C, Burgess S & Gossage D, (2003)

‘Competition and Quality: Evidence from the
NHS Internal Market 1991-1999’

CMPO Working Paper, University of Bristol

• Estimates the effect of competition (as introduced by the NHS Internal Market reforms) on quality of care in NHS hospitals.
• Quality is measured using the death rate from acute myocardial infarction (AMI).
• Level of competition is measured in 3 ways, each relating in some way to the number of hospitals within 30 minutes drive of the hospital under consideration.
• Uses panel data from 1991 to 1999 to exploit the fact that competition policy changed over the 1990’s – it was introduced in 1991, actively promoted until 1995, downplayed from 1996 until 1997, then actively discouraged post-1997.
• The panel data and analysis allows more detailed analysis and conclusions than the authors’ similar (2000) paper.

Key results:

• The authors find evidence that the effect of competition was to reduce quality. Hospitals located in more competitive areas have higher death rates during the period.
• The estimated effect of competition is robust to different measures of competition and hospital volume.
• The disparity in death rates between the most and least competitive areas is greatest around 1995, when competition was at its height.
• Cumulated over the entire period, the higher death rates associated with competition more than offset the positive impact of technological change in reducing death rates.
• However, if hospitals competed by simultaneously reducing quality for services (like AMI) with low demand elasticity (AMI is an Accident & Emergency condition) and increasing quality where demand elasticity was higher, it is at least possible that competition could have raised overall quality.

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