Propper C, (1996)

‘Market Structure and Prices: the Responses of Hospitals in the UK National Health Service to competition’

Journal of Public Economics, 61 (3): 307-335

• Examines the pricing responses of NHS hospitals to competition, for four medical specialties.
• Uses Department of Health pricing data to compare prices charged (internally) by NHS hospitals to Divisional Health Authorities and GP Fundholders.
• Uses the number of hospitals providing a given service within 30 minutes drive of a hospital, and the number of patients treated in the specialty by all NHS suppliers within this travel zone, as two measures of competition/market size.

Key results:

• The results offer some support for the view that competition results in lower prices in the NHS internal market.
• Market size appears to have no effect on general surgery and orthopaedics prices, but does have a negative effect on ENT and gynaecology prices.
• Sellers appear to be willing to mark up prices more where absolute cost is low (gynaecology and ENT), perhaps reflecting responsiveness to cash-constrained buyers.

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