Friday, January 18, 2013

Health Care Competition Saves Lives

Evidence has been mounting on the impacts of health care competition on the quality of care. The vast majority of these studies look at hospital competition and use mortality risk as a measure of the quality of care. Two recent studies I've done with colleagues analyze the impact of reforms in the English NHS designed to promote competition among hospitals.

In one study, Rodrigo Moreno-Serra, Carol Propper and I examine the impact of these reforms on mortality for heart attack patients and overall mortality. We find that mortality declined substantially more after the reforms for hospitals facing more potential competition than for those that did not. Specifically, we estimate that the reforms led to a 0.3% drop in the mortality rate for heart attack victims, saving nearly 1,000 lives per year. A recent article in Vox (an online economic policy journal) summarizes the results.

In a followup study, Carol Propper, Stephan Seiler and I analyze the impact of the NHS reforms on patient choice of hospitals for heart bypass surgery (CABG). This is summarized in a recent Vox article. We find that NHS patients are much more responsive to quality differences across hospitals (measured as risk-adjusted mortality rates) after the reforms. As a consequence, hospitals are driven to be responsive to patients and compete on the basis of the quality of care. We find that the reform reduced mortality for bypass surgery patients by 3%, via patients choosing better quality hospitals.

While there is still a lot of work to do to better understand the nature of competition in health care markets and impacts on quality, these two studies do add to a growing body of evidence on the topic. The weight of the evidence, in my opinion, is showing that health care competition saves lives. For more general overviews on the evidence, see a recent synthesis piece on hospital consolidation that Robert Town and I wrote for the Robert Wood Johnson Foundation, an earlier synthesis piece by Town and William B. Vogt, a chapter that Town and I wrote for the Handbook of Health Economics , and a recent survey piece on hospital competition under fixed prices by Hugh Gravelle, Rita Santos, Luigi Siciliani, and Rosalind Goudie.

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