The Market and Health Care Production

The importance of health care to the economy and society, and its rising cost, mean that governments are constantly searching for ways to increase productivity and promote innovation. The use of market mechanisms in health care is a key component of current reforms to health care delivery in many countries. The political appeal is simple: competition fosters productivity in the rest of the economy, so it will in health care too. But the evidence base is mixed, limited and comes predominantly from the USA, which is an outlier compared to most other health care systems.

At the same time as the greater use of market mechanisms has been promoted, from other quarters have come calls for greater integration in health care delivery and doubts raised about whether competition can deliver the step changes required. In the UK at present, for example, there is vociferous opposition to the greater use of market forces in the Coalition government's Health and Social Care Bill. In the USA, Obama's Affordable Care Act includes proposals for greater integration between health care providers and insurers.

All these factors mean that understanding the applicability of, and the limits to, market forces in health care is of highest priority. The over-arching question I seek to answer is under what conditions will the greater use of market mechanisms be beneficial for the users and payors of health care services.

Within this over-arching question I will address two broad questions:

How strong is the support for the use of competition and choice in health care and what evidence is there that integrated care models or command and control can do better?

How do market forces affect the labour market and the behaviour of health workers?

Within these broad questions, I will address a range of specific issues. These include whether price regulation is needed to make competition in health care work; the role of information in increasing quality; whether choice of family doctors improves their quality; the extent to which production should be concentrated into high volume units, and whether pay structures for managers of public hospitals reward good performance and good management and how not-for-profit hospital behave when faced with competition compared to for-profits.

These issues are all central to understanding how health care is best produced. Our present knowledge is partial and this limits the policy makers in their search for solutions that will improve the efficiency of the health care sector.

My research agenda will be coupled with a strong impact agenda to translate and disseminate these, and the findings of other scholars, to inform the development of better policy. I have a long track record of active engagement with policy makers and industry participants: this fellowship will give me the opportunity to spend more time ensuring that research findings have maximum impact.

Who will benefit?

The focus of my research - the impact of market mechanisms on the delivery of health care - means that the results of my planned Fellowship are likely to have impact on a wide set of beneficiaries. These include:

Academics in economics, social policy and health service research;

The public sector. This includes the UK Department of Health in its policy making role and its service delivery role; the newly created regulators of healthcare in the UK (Monitor - who have a very large agenda at present in which there are many economic issues on which there is relatively little extant theoretical or empirical guidance); non health care regulators such as the OFT and the Competition Commission; the Devolved Administrations of Scotland, Wales and Northern Ireland, as they have responsibility for health care delivery policy; and central departments of health and health care regulators in other health care systems who have implemented or who are seeking to increase pro-market reforms (for example, the Netherlands, Germany, France, Switzerland, the Nordic countries);

Private and third sector delivers of care in the UK;

Finally, health care is of interest to people generally, as users of health care services, taxpayers and voters. One aim of my research is to help inform the active public debate about how health care services should be delivered.

What are the benefits?

For the academic community the benefits are from the methods, findings, data and capacity building.

Beyond the academic community, the findings are relevant to those who design and implement health care policy.

The findings also are relevant more generally as:

Health care provision is a major component of the UK public sector, so extending our understanding of health care productivity is important for understanding how (and how not) to increase public sector productivity;

Health care accounts for just under 10 percent of the economy, so increasing our understanding of how to increase productivity in this sector is of relevance for economic growth and competitiveness;

Better health contributes to quality of life and my research is of considerable relevance to users of health care. For example, patients will be concerned as whether competition in health care reduces or increases their chances of death following admission to hospital or decreases their chances of getting hospital acquired infections.