The impacts of private hospital entry on the public market for elective care in England

Abstract

This paper examines reforms that enabled private hospitals to compete with public hospitals for elective patients in England. Studying hip replacements, we compare changes in outcomes across areas differentially exposed to private hospital entry, instrumenting hospital entry with the pre-reform location of private hospitals. We find private hospital entry increased the number of publicly funded hip replacements by 12% but did not reduce volumes at incumbent public hospitals, and had no impact on readmission rates. This suggests new entrants exerted little competitive pressure on incumbents. Instead, the market expanded with more marginal patients receiving treatment at an earlier point in time, resulting in a fall in average patient severity. Additional publicly funded volumes were not associated with reduced privately funded volumes, while impacts of provider entry did not vary by local deprivation. These findings indicate the reform increased publicly funded capacity but did not improve quality at existing public hospitals.