[EQ] The Impact of Competition on Management Practices in Public Hospitals

The Impact of Competition on Management Practices in Public Hospitals

Nicholas Bloom Stanford University, NBER and Centre for Economic Performance

Carol Propper Imperial College, CMPO University of Bristol and CEPR

Stephan Seiler London School of Economics, Centre for Economic Performance

John Van Reenen London School of Economics, Centre for Economic Performance, NBER and CEPR

Stanford Department of Economics  This draft: October 17th 2009

 

Available online PDF [35p] at : http://www.stanford.edu/~nbloom/hospitals.pdf

 

“……….We exploit a unique dataset and natural experiment to identify the impact of competition on public hospital management practices. We use a new double-blind management scoring tool to interview 161 physicians and managers in English National Health Service (NHS) hospitals, covering 61% of acute hospitals.

 

We find this management measure is strongly correlated with hospital performance as measured by clinical outcomes (e.g. survival rates from heart attacks) and general operational and financial outcomes. We then instrument the number of competing local public hospitals with the share of marginal local political constituencies.

 

In the UK the Government almost never closes public hospitals in political marginals because they risk losing seats in a general election. But they do regularly close hospitals in both their own and the oppositions non-marginal constituencies. Over the period we study the Labor government closed a large number of hospitals, leading to wide variations in hospital concentration levels, which are strongly correlated with whether the constituency was politically marginal. Exploiting this identification we find that product market competition, as proxied by the proximity of other hospitals, is significantly associated with better management…..”

 

“………..In this paper we have described a new methodology for quantifying the quality of management practices in the healthcare sector. We have implemented this survey tool on almost two thirds of acute hospitals in England. We found that our measure of management quality was robustly associated with better hospital outcomes across mortality rates and other indicators of hospital performance. This is consistent with Bloom and Van Reenen’s (2007) work in the manufacturing sector………..

 

 

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