Focusing healthcare competition on quality not price

Bristol research leads to hospitals competing on quality - not price - for elective care, improving patient experience without increasing resource use.

In a market economy, if you give work to the lowest bidder, there are bound to be quality implications. Economists at the University of Bristol showed that allowing hospitals to compete on price for elective care reduced the quality of healthcare. They advocated price regulation, a system that is still in place today.

The way the NHS is run changes with every change in government, so if researchers have ideas about how things can be improved, it can be a big challenge for their work have a lasting impact. Professor Carol Propper from the University of Bristol's Centre for Market and Public Organisation managed to not only show convincingly that a potential policy change would do damage, but also to convince politicians to change their minds.

“In my 20 years’ experience in Government it is most unusual for even the best research work to have such influence as that on competition undertaken by Professor Propper”, said a director at the Department of Health.

Quality of care

In the late 1990s, Propper looked into the impact of market structure on the quality of hospital care. She examined the NHS internal market reforms which were introduced in 1991 and abolished in 1997. In these reforms, hospitals competed on price and volume. Propper’s research showed that such competition led to a decline in quality (indicated by higher death rates in competitive markets) and suggested that these reforms cost lives.

Then in 2010, Propper investigated the Labour government’s ‘pro-choice’ reforms of 2006. These re-established competition between hospitals, but under a system of regulated prices. Propper’s research showed that the reforms raised quality for patients without increasing resource-use. Her work suggested that the reforms saved approximately 4,791 life years.

“Back in the 1990s, we did not have the measures of quality that we have today, so hospitals were competing on price alone for elective care such as hip replacements,” said Propper. “This led to a drop in quality. But without the measurement techniques in place, it was difficult for hospitals to compete on quality. By 1999 these quality measures were developed and we found that price regulation allowed competition to occur on quality, giving a better outcome for patients.”

Impact on decision-making

So when in 2011 the then Secretary of State for Health Andrew Lansley stated that he was considering de-regulating prices, Propper felt she had to act. She had one-to-one meetings with Lansley and the Number 10 policy advisor on health and also presented her research findings at the UK Department of Health, the Prime Minister’s Strategy Unit, the Treasury and the Cabinet Office. She was also a member of the expert panel for the Office of Fair Trading 2011 review of competition in private medical care and for the Office of Health Economics Commission on Competition.

Officials testify that Propper’s body of research has had a major impact on decisions made throughout the process of developing a structure of market regulation. A Department of Health director stated: “The quality of the research and the clarity of its conclusions directly led to Government amendments, to what is now the Health and Social Care Act, ruling out the possibility of price competition."

Hospital mergers

Propper has also investigated the effect of hospital mergers on patient care, deficits and waiting times. She found that mergers resulted in longer waiting times, larger deficits and no evidence of improvement in clinical outcomes. This research has been used by policymakers to inform decisions about healthcare mergers.

“The Centre for Market and Public Organisation at the University of Bristol has a very active outreach programme and I have never turned down an opportunity to present my work to policymakers,” said Propper. “I feel it is extremely important that we have evidence-based policy and I will continue to strive to make sure my research reaches the right people.”

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