Go to the Globe and Mail homepage

Jump to main navigationJump to main content


Report on Business

Economy Lab

Delving into the forces that shape our living standards
for Globe Unlimited subscribers

Entry archive:

(Scott Barbour/Scott Barbour/Getty Images)
(Scott Barbour/Scott Barbour/Getty Images)

Economy Lab

In Britain, not all competition is healthy Add to ...

A little competition never hurt anyone. When it comes to health care, it may even save your life, according to some economists.

But the question of what form competition should take in health care has become a sticky issue in Britain.

"It's quite fair to say that competition is saving people's lives," said Carol Propper, an economics professor at Imperial College London and Bristol University. "But the rules of the game are incredibly important. The institutional features really matter."

In 2006, the former British Labour government introduced fixed prices for hospital procedures. The move put an end to the previous practice that saw hospitals negotiate treatment prices in annual contracts with local health authorities.

At the same time, new policies mandated that all patients requiring hospital procedures be given a choice of five different NHS institutions. To assist them in their decisions, patients were also given access to a variety of quality indicators for each hospital, including wait times and mortality rates. Prior to this, patients were generally assigned to the nearest hospital by their family practitioner.

With prices set and Brits free to choose where their procedures were performed, 70 per cent of hospital revenue became dependent on market share or the number of patients the hospitals attracted.

The idea was that competition would shift from price to quality of care.

And this is exactly what happened, according to a study by Ms. Propper and colleagues Rodrigo Moreno-Serra and Martin Gaynor.

Patients discharged from hospitals in more competitive areas were less likely to die, had shorter lengths of stay and were treated at no extra expense. Specifically, the policy resulted in an estimated 3,354 life years saved. Hospitals with better quality indicators tended to attract more patients and the distance people travelled for care also rose.

"What we expect is if you continue this policy you might expect to see even bigger effects," Ms. Propper said.

But the rules of the game may soon change again. The British government has proposed a re-introduction of price competition for a range of treatments, a move that has spurred much criticism from health economists, including Ms. Propper.

In a previous study, Ms. Propper found that price competition in health care during the 1990s brought down costs, but at the expense of quality.

"What happened there is competition in that market brought quality down," she said. "In that market competition killed."

Report Typo/Error

Follow us on Twitter: @GlobeBusiness


Next story




Most popular videos »

More from The Globe and Mail

Most popular