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Public Sector Hospital Competition, New Private Market Entrants and Their Combined Impact on Incumbent Providers' Efficiency: Evidence from the English National Health Service

This paper uses a difference-in-difference style estimation strategy to separately test the impact of competition from public sector and private sector hospitals on the productivity of public hospitals. Our identification strategy takes advantage of the phased introduction of a recent set of substantive reforms introduced in the English NHS in the 2000s that forced public sector health care providers to compete with other public hospitals and eventually face competition from existing private sector providers for care delivered to publicly funded patients. In this study, we measure efficiency using hospitals' average length of stay (LOS) for patients undergoing elective surgery. For a more nuanced assessment of efficiency, we broke LOS down into its two key components: the time from a patient's admission until their surgery and the time from their surgery until their discharge. Our results suggest that competition between public providers prompted public hospitals to improve their productivity by decreasing their pre-surgery length of stay. In contrast, competition from private hospitals left incumbent public providers with a more costly case mix of patients and led to increases in post-surgical LOS.