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CEP discussion paper
Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service
Zack Cooper, Stephen Gibbons and Matthew Skellern June 2016
Paper No' CEPDP1434:
Full Paper (pdf)

JEL Classification: C23; H57; I11; L1; L33; R12

Tags: hospital competition; public-private competition; market entry; market structure; outsourcing; hospital efficiency; risk selection; cherry picking

This paper examines the impact of competition from government-facilitated entry of private, specialty surgical centres on the efficiency and case mix of incumbent public hospitals within the English NHS. We exploit the fact that the government chose the location of these surgical centres (Independent Sector Treatment Centres or ISTCs) based on nearby public hospitals’ waiting times – not length of stay or clinical quality – to construct treatment and control groups that are comparable with respect to key outcome variables of interest. Using a difference-in-difference estimation strategy, we find that ISTC entry led to greater efficiency – measured by pre-surgery length of stay for hip and knee replacements – at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker, and who stayed in hospital longer after surgery.