Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service

This paper examines the impact of a government programme which facilitated the entry of for-profit surgical centres to compete against incumbent National Health Service hospitals in England. We examine the impact of competition from these surgical centres on the efficiency - measured by pre-surgery length of stay for hip and knee replacement patients - and case mix of incumbent public hospitals. We exploit the fact that the government chose the broad locations where these surgical centres (Independent Sector Treatment Centres or ISTCs) would be built based on local patient 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 the government-facilitated entry of surgical centres led to shorter pre-surgery length of stay at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker. This paper highlights a potential trade-off that policymakers face when they promote competition from private, for-profit firms in markets for the provision of public services.