Interesting paper published in Journal of Public Economics that examines the impact of a government programme which facilitated the entry of for-profit surgical centres (Independent Sector Treatment Centers or ISTCs) to compete against incumbent National Health Service (NHS) hospitals in England. They examined the impact of competition from these ISTCs on the efficiency – measured by pre-surgery length of stay for hip and knee replacement patients – and case mix of incumbent public hospitals. Government chose the broad locations where these ISTCs would be built based on local patient waiting times – not length of stay or clinical quality. Researchers found that the government-facilitated entry of ISTCs led to shorter pre-surgery length of stay at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker. This paper highlights a potential trade-off that policymakers face when they promote competition from private, for-profit firms in markets for the provision of public services.
- Does competition from private surgical centres improve public hospitals’ performance? Evidence from the English National Health Service. Journal of Public Economics. October 2018