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Inside the Black Box: How Competition between Hospitals Improves Quality and Integration of Services

Recent economic research has shown that fixed-price quality competition in the NHS in England is benefiting patients and taxpayers. This research has focused primarily on important outcomes of competition, for example the number of lives saved. In this paper we focus on the mechanism of competition (sometimes referred to as the ‘black box’) which has led to these higher quality outcomes. This paper uses information obtained by the Co-operation and Competition Panel (CCP) in its investigations into hospital trust mergers over the period May 2011 to May 2012, to illuminate this ‘black box’. In particular, this paper highlights the types of actions taken by hospital trusts facing competition that are likely to improve the quality of the patient’s treatment as well as the patient’s experience. Competition is one of the levers that can deliver benefits for patients and taxpayers protect and promote the interests of people who use health care services.