Critical Review of the Quality and Competition Measures and Indentification Strategies Used in Health Care Stuides

The OHE Commission on Competition in the NHS commissioned a critical review of the quality and competition measures and identification strategies used in peer reviewed health care literature. The objective W to assess how robust is the evidence emerging from the empirical literature to guide policy on competition in the NHS. The literature analysed can be characterized by the following features: 1. The literature mainly focuses on hospital competition rather than competition for other types of health care. 2. Most studies are US based, though a small core of studies employ English NHS data. 3. Most studies use hospital market concentration measures to proxy for market competition. The most widely used is the Herfindahl-Hirschman Index (HHI). Recent English analyses have employed HHI indices based on hospitals’ shares of non-emergency patient activity. They follow a Structure-Conduct-Performance(S-C-P) approach and measure how changes in concentration indices might be causally associated with changes in hospital services’ quality. In this framework, hospitals are modelled as a “black box”, and studies do not generally investigate the process by which hospitals’ actions may affect quality. 4. Outcome measures are extensively used to measure hospital quality and mortality rates are the most popular and widely used. Studies conducted under conditions of competition on price and quality simultaneously have generally evolved to include a variety of outcome measures. The reason seems to be the perception that the effects of competition can show heterogeneous impacts on quality across different hospital markets. In contrast, studies conducted under fixed-price quality-based competition regimes, although with some exceptions, often include one quality measure. The reason for this approach is not obvious from the literature but seems driven by theory, which predicts that competition with regulator-fixed prices increases quality. Therefore, researchers have focused their efforts on measuring overall hospital quality, because competition is expected to increase quality across all hospital services. 5. The most commonly used outcome measure in competition studies is the 30 day in-hospital AMI (Acute Myocardial Infarction) mortality rate. This is especially true for English NHS related literature. The reasons are that: AMI deaths are relatively common; death as an outcome is easy to measure and hard to obscure; the scope for patient selection by hospital service providers in AMI emergency cases is less than for non-emergency cases; AMI mortality is argued to be a general marker of hospital quality overall; and AMI mortality data is routinely collected by regulators. In addition, using AMI death rates permits de facto comparability across studies. 6. Researchers have used a wide variety of econometric techniques to identify the effects of competition and link these causally to changes in hospital service quality. These techniques have generally been developed to deal with the confounding of competition and quality effects. English time series and panel studies have the additional advantage that they can exploit a policy change, observing differences in trends before and after the policy takes effect, while US based studies have been more restricted in using this strategy. The critical analysis reveals the following: 1. Measuring quality is difficult because quality is multi-dimensional and complex. There is debate about the suitability of AMI mortality, which is commonly used in empirical studies, as an appropriate proxy for overall hospital quality. Evidence presented in the English literature is largely based on statistical correlations between AMI and other outcome measures. This evidence is difficult to evaluate because the literature is silent in explaining underlying factors causing these statistical relationships. In future it should become possible to better study the impact of competition on quality as more and different quality measures are becoming available, including patient reported outcome measures (PROMs). Future research could usefully examine a wider range of hospital markets for the impact of competition on quality in them. 2. There is a lack of understanding of the spillover mechanisms by which competition restricted to non-emergency services may impact on general markers of hospital quality, including indicators of the quality of hospital emergency services such as AMI mortality. There is a need to research further into: (1) the relationship between competition and changes that may be happening at overall hospital level (e.g. managerial quality); (2) outcomes in areas where changes in hospital behaviour have been shown to have happened; and (3) by modelling underlying demand and supply rather than relying on S-C-P “black box” approaches. 3. The role of market entry and exit is relatively neglected in the empirical literature. However, much of the potential benefits of competition are driven by these dynamic aspects. Further research is warranted in this area.