Propper C, Wilson D and Söderlund N, (1998)

‘The Effects of Regulation and Competition in the NHS Internal Market: the Case of General Practice Fundholder Prices’

Journal of Health Economics, 17 (6): 645-673

• Examines whether the NHS Internal Market reforms have affected the prices posted by sellers of medical services.
• The reforms included regulation designed to limit price competition. The authors use prices posted for one of the two types of buyer – GP fundholders – to examine whether such competition nonetheless took place.

Key results:

• The regulatory rules require zero mark-up on average costs. The authors find evidence of both positive and negative mark-ups.
• The negative mark-ups indicate that, for several procedures, NHS hospitals sell to GP fundholders at less than average cost. The extent to which this variation can be explained by market related factors, however, is found to be limited.
• Once controls are made for hospital costs, however, market forces do appear to have an impact, with some evidence of a negative association between competition and prices.
  

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