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Competition makes NHS hopitals more efficient

Competition in the English NHS improves hospital efficiency and can save the health service significant amounts of money, according to a new study by researchers at the London School of Economics and Political Science (LSE).  

The study finds that hospitals located in areas where patients have a great deal of choice improve their efficiency more quickly than hospitals located in less competitive markets. What's more, the hospitals in competitive markets are able to improve efficiency and save money without any negative impact on patient outcomes. 

monitorThese findings suggest that as the NHS faces significant pressure to slow spending, patient choice and hospital competition can be a powerful tool to save money.

One of the study's authors, Zack Cooper, said: 'Competition creates very clear incentives for hospitals to become more efficient. 

'As George Osborne prepares the country for a period of financial austerity, this research helps illustrate how policy-makers get more value for money from the health service instead of having to ration care for cancer, increase waiting times or cut hospital staff.' 

The study, which is published today by the Centre for Economic Performance at LSE, was carried out by Zack Cooper, Stephen Gibbons, Simon Jones and Alistair McGuire. 

Analysing NHS data for the period from 2001 to 2008, the research team measured efficiency as a patient's length of stay in the hospital, breaking that down into its two key components – the time from the patient's admission until their surgery and then the time from surgery until discharge. 

They find that hospitals facing heavier competition cut down on the length of stay prior to elective surgery without shortening post-surgery length of stay or having higher readmission rates or higher mortality. Improving efficiency in this way without compromising patient care saved hospitals significant resources.  

These findings confirm previous work by Cooper and his colleagues, which found that competition prompted hospitals to improve their quality. It also echoes a recent OECD report, which suggests that the best way for the NHS to become more efficient is for the health service to embrace more fully patient choice and hospital competition. 

Zack Cooper said: 'Going forward, the NHS is going to face significant pressure to slow health care spending. Unfortunately, there are only two ways to slow how much we spend on health care: we can either cut services or become more efficient. 

'Clearly, we'd rather see hospitals becoming more efficient instead of cutting services that patients value. Our research suggests that this can happen through greater patient choice and hospital competition'


Does Hospital Competition Improve Efficiency? is a discussion paper by Zack Cooper (LSE Health), Stephen Gibbons (Department of Geography and Environment and the Centre for Economic Performance, LSE), Simon Jones (LSE Health), and Alistair McGuire (LSE Health and the Department of Social Policy). 

  For more information, please contact:

Zack Cooper

+44 (0)77 258 98597