Free to Choose? Reform and Demand Response in the English National Health Service

Abstract

The impacts of choice in public services are controversial. We exploit a reform in the English National Health Service to assess the impact of relaxing constraints on patient choice. We estimate a demand model to evaluate whether increased choice increased demand elasticity faced by hospitals with regard to clinical quality and waiting time for an important surgical procedure. We find substantial impacts of the removal of restrictions. Patients became more responsive to clinical quality. Sicker patients and better informed patients were more affected. We leverage our model to calculate potential benefits. We find increased demand responsiveness led to a significant reduction in mortality and an increase in patient welfare. The elasticity of demand faced by hospitals increased post-reform, giving hospitals potentially large incentives to improve their quality of care and find suggestive evidence that hospitals responded strongly to the enhanced incentives due to increased demand elasticity. The results suggests greater choice can enhance quality.

Student satisfaction, league tables and university applications: Evidence from Britain

“…Additionally, the article is instructive for recent debates in economics about salience, and the propensity of market actors to pay disproportionately more attention to information presented in some formats than others (Chetty et al, 2009;Falkinger, 2008;Hirshleifer and Teoh, 2003). Our findings also relate to work in industrial organization and the under-researched question of how demand responsiveness to beliefs about quality is moderated by the degree of market competition (Beckert et al, 2012;Gaynor et al, 2012;Porter, 1974). The present study is additionally of interest to decision-makers at both university and departmental levels who have increasingly confronted questions about the pay-offs from investments to improve student satisfaction scores and popular league table rankings (Hazelkorn, 2008;The Economist, 2013).…”

“…Another novel finding of our study, which builds on recent work in health-care settings (Beckert et al, 2012;Gaynor and Town, 2011;Gaynor et al, 2012), concerns market concentration, competition and power. We show that the impact of information on quality derived from league tables is strongly influenced by the number of providers in a particular subject or geographical area.…”

What Underlies the Observed Hospital Volume-Outcome Relationship?

“…Since hospitals are expected to be responsive to patient demands, increasing the importance of distance will lessen the importance of other aspect of the demand function. The current literature on the determinants of patient choices shows that quality of care, the distance to the hospital, waiting times, and other hospital amenities are the main factors taken into account by patients when making this choice (Baker, Bundorf, & Kessler, 2016;Beckert & Kelly, 2017;Gaynor, Propper, & Seiler, 2016;Gravelle, Santos, Siciliani, & Goudie, 2012;Victoor, Delnoij, Friele, & Rademakers, 2012). Thus, the decrease in options available to patients could lessen the providers' incentives to provide high quality care and to limit waiting times.…”

The Changing Role of Government in Financing Health Care: An International Perspective

“…Their estimates confirm that reforms giving patients choice of hospital increased patient elasticity of demand with respect to service quality. They found considerable heterogeneity in their estimates, with sicker patients responding more to the reform, but did not find significant response differences by income (Gaynor, Propper, and Seiler 2012). Cooper et al (2010) also examine the effects of increased competition in the NHS using a difference-in-differences approach with "exposure" to competition and time as the two differences.…”

“…Using discharge data and comparing variation in market structure across hospitals through market concentration, they found that hospitals competed on quality, resulting in improvements in mortality and length of stay. In a follow-up paper (Gaynor, Propper, and Seiler 2012), the authors estimate a structural demand model using data from the same reforms for coronary artery bypass graft surgery. Their estimates confirm that reforms giving patients choice of hospital increased patient elasticity of demand with respect to service quality.…”