Private sector competition 'leaves NHS with more costly patients'

Research from the London School of Economics said competition from private hospitals “did not spur public providers to improve their performance and instead left incumbent public providers with a more costly case mix of patients”.

This “led to increases in post-surgical length of stay”, argued the paper by Zack Cooper, from the LSE’s centre for economic performance, Stephen Gibbons, from its department of geography, and Simon Jones and Alistair McGuire, both from LSE health.

The paper, released this morning, said: “Public hospitals located in areas with more private providers tended to have higher LoS in 2008, 2009 and 2010. This finding seems to be consistent with evidence that private sector market entry left incumbent providers treating a more costly case-mix of patients who were older and less wealthy.

“This finding highlights the crucial need for policy-makers to risk-adjust payments as they introduced competition in markets with regulated prices, particularly when there are both public and private providers with different objective functions.”

The definition of private sector competition used in the research did not include independent sector treatment centres.

In its conclusion the paper said: “It is unclear from our analysis whether or not the private sector providers avoided treating less costly patients or whether these results stem from healthier and younger patients choosing to receive care in the private sector.”

But the LSE analysis also found competition between NHS providers, introduced in 2006, “led to moderate but statistically significant reductions in pre-surgery, postsurgery and overall LoS”.

Dr Cooper said: “Competition creates very clear incentives for hospitals to become more efficient. However, this is not a one-size-fits-all policy where more competition is unambiguously better. Markets in health care require strong regulation to get good outcomes.

“Competition has been hotly debated in the NHS over the last year. This study highlights the benefits competition can provide but it also underscores the need for a strong active regulator to guard against providers cherry-picking the easiest cases. 

“Hospitals need to be competing to offer excellent care and better service. But we need to not make it profitable for them to avoid treating certain potentially more costly patients.” 

David Worskett, director of the NHS Partners Network which represents the independent sector in the NHS, said: “If independent sector providers had been allowed to compete across a wider range of services, I believe there would be stronger evidence of the benefits of competition.

“Both the number and type of procedures carried out by independent healthcare providers is not determined by the sector itself but by what the NHS commissions and by restrictions imposed on the sector by the NHS and regulating bodies.

“Independent healthcare providers deliver exactly what they are contracted to deliver but these restrictions limit the range of services and procedures they can offer. This then leads and to inaccurate accusations of cherry-picking.”