NCBI Bookshelf. A service of the National Library of Medicine, National Institutes of Health.
Siciliani L, Chalkley M, Gravelle H. Does provider competition improve health care quality and efficiency? Expectations and evidence from Europe [Internet]. Copenhagen (Denmark): European Observatory on Health Systems and Policies; 2022. (Policy Brief, No. 48.)
Does provider competition improve health care quality and efficiency? Expectations and evidence from Europe [Internet].
Show detailsThere is no consensus among policy-makers on whether provider competition improves health care quality and efficiency
Provider competition has been a feature of health care markets in the USA, but also some European countries such as Germany, the Netherlands and France. Other European countries, such as the UK, Italy and Norway, did not historically feature provider competition but have introduced it over time. Policy-makers in favour of competition in the health sector typically argue that competition among providers within a market has virtuous properties for both quality and efficiency. In other institutional contexts, policy-makers are sceptical of competition and voice concerns that providers operating in a competitive environment will seek to minimize cost and maximize profit by skimping on service quality and reducing access. Competition can also hamper collaboration opportunities across providers and can be seen as a step towards privatization of the health sector. This policy brief reviews the evidence on the effects of provider competition from seven countries in Europe. While it mainly focuses on hospital care, evidence from the primary care and integrated care markets is also analysed.
The evidence base on provider competition in Europe is growing but remains limited
Policies that promote competition are increasingly common in European countries. A body of empirical evidence that evaluates such policies has grown over time but remains limited and is clustered in a small subset of European countries. The evidence is also context dependent as institutional arrangements differ significantly across health systems. There is therefore scope for further research across additional European countries and for exploiting the diversity in institutional arrangements to investigate different aspects of provider competition. A key challenge remains the availability of data to the research community, in particular, in relation to quality measures for large, representative samples of patients. Even for countries for which we have good evidence on the effects of competition on quality, we know less about the mechanisms underlying the effects of competition on quality, costs and the efficiency of providers.
Proximity to provider remains the main driver of patient choice
A prerequisite for hospital competition to work is that patients can choose the provider. Patient demand does appear to change in response to the quality differences across hospitals, but the effects are relatively small. This currently limits the extent to which choice policies can improve patient allocation across providers or effectively raise quality because providers’ financial incentives to raise quality is muted by the low responsiveness of the demand side. There is therefore scope for further enhancing public reporting and supporting patients in exercising choice. However, it is not clear that this will in itself lead to more patients making informed and effective choices, or that the costs of providing better information will be outweighed by the benefits. The limited evidence on patient choice also suggests that more educated individuals generally respond more to quality than less educated ones. This may potentially have equity implications as it can increase disparities in health if more educated individuals, facilitated by patient choice, are able to access providers offering higher quality of care. This is an area in which further research is required to quantify such gradients.
Hospital competition can improve some dimensions of quality but not others
The evidence suggests that more competition among hospitals can improve some dimensions of quality, such as heart attack mortality, but the effect does not systematically translate to other quality dimensions for emergency and elective care, and in some cases may even have the unintended effect of reducing quality. More research is needed to open up the “black box” to understand the underlying mechanisms to ensure that competition works more systematically to enhance quality in the hospital sector, and across diverse institutional arrangements.
There appears to be a tension between activity-based payments, that are a prerequisite for competition to work, and expenditure control
A concern about competition under a diagnosis-related group (DRG)-type payment system is that DRGs can encourage excessive increases in care volumes and total hospital spending. One way to address these concerns is to introduce what is known as “mixed” or “blended” payment systems. These combine a fixed budget component with a price which is below the average cost. However, setting DRG prices below average costs might help mitigate excessive incentives to increase volumes; it may also hinder quality competition since hospital profit margins from attracting additional patients will be reduced. Policy-makers should therefore be cautious not to set DRG prices too low.
Hospital mergers require a careful assessment to ensure they bring benefits
Driven by secular reductions in length of stay, hospitals have regularly merged to maintain scale economies, but these mergers can reduce competition and restrict patient choice and access. The scant existing empirical evidence does not suggest that hospital mergers increase quality as claimed by most of the hospitals participating in the mergers. There is therefore a risk that some mergers are allowed without bringing any benefits in terms of quality and at the cost of reduced patient choice, particularly in countries with lower hospital densities. Therefore, hospital mergers require careful assessments to ensure they bring benefits. The challenge for competition authorities remains the assessment of the effects of the proposed merger on quality, both in terms of accessing good information on quality and modelling the effects of the prospective merger. As an alternative to mergers, regulators could encourage hospitals to employ other solutions, such as the establishment of clinical networks or other forms of collaboration in order to achieve synergies.
Public and private providers do not systematically differ in terms of quality and efficiency
The limited empirical literature across European countries does not make a compelling case for either the quality or efficiency of private providers to be generally better compared with public providers, and this is consistent with evidence from other countries. This is an important point because, in the political debates on competition reforms, there are often claims of private providers being more efficient than public ones, and this is a key argument to encourage their entry and competition between public and private providers. An empirical challenge remains to control for patient case mix as private providers may treat less costly patients, biasing the comparison in favour of private hospitals both in terms of quality and efficiency.
In primary care, competition, better information and greater choice have the potential to improve quality and accessibility
General practice differs from hospital care in many respects. Providers are usually small, mainly privately-owned businesses, operating in small geographical markets and with a small number of rivals. But the key issues related to patient choice and provider competition remain the same. Policy-makers can support public reporting to facilitate patient choice of a general practitioner (GP) practice. In turn, free choice can provide an incentive to GPs to compete on quality. The evidence base on patient choice and provider competition in primary care is, however, more limited, but so far this evidence echoes the findings for secondary care in that distance to the provider is the main driver of patient choice.
Provider competition offering integrated care for patients with chronic conditions is possible
Primary care is meant to act as the lead organization in several European countries with the aim of improving coordination of care with other organizations in or outside the health sector for patients with chronic conditions. This typically involves GPs working in teams in larger practices, and patients still being free to choose their GP practice. Primary care providers therefore can potentially compete for patients by offering attractive integrated care arrangements. But whether provider competition is weakened as a result of pursuing integrated care processes depends in principle on different factors related to the generosity of bundled payments, the extent to which bundled processes restrict patient choice, possible provider consolidation and strengthened negotiating positions with funders. The evidence on these issues remains, however, very limited.
- Executive summary - Does provider competition improve health care quality and ef...Executive summary - Does provider competition improve health care quality and efficiency?
Your browsing activity is empty.
Activity recording is turned off.
See more...