Competition in Healthcare: A Review of International Evidence

Perspectives in Public Health, May 2016 | Go to article overview

Competition in Healthcare: A Review of International Evidence


What are competitive healthcare markets?

During the last 25 years, competition in healthcare has been part of reform in many countries. This applies to countries which provide a national health service such as the United Kingdom, Spain, Australia and New Zealand and countries with social insurance models such as France, Germany and Belgium. Traditionally, public healthcare provision was controlled by governments who either funded services or enrolled citizens into insurance schemes paid for through taxes. During the 1990s, quasi markets were introduced. These are designed to not only give public services the benefits of a free market but also allow the government to preserve their equitable ethos.1 The economic principle behind free markets is that buyers and sellers can freely choose who to trade with. Consequently, different suppliers must compete with each other to attract customers. Markets can be structured differently depending on the number of competitors. Perfect competition exists when there are many buyers and sellers who are free to enter and leave the market. Conversely, some markets operate as monopolies with a single supplier or oligopolies with only a few suppliers. Economic theory implies that competitive markets reduce costs; however, quasi markets allow governments to regulate price so that competition is primarily based on quality. The appropriateness of competition in healthcare markets is frequently debated, and it is often questioned whether healthcare is suitable for a competitive market at all due to its unique characteristics.

international evidence

The primary aim of competition in healthcare is to improve quality. Overall, research on healthcare quality is mixed, with research showing that competition can have both positive and negative effects.2 UK studies have shown that increased competition improved clinical outcomes such as mortality rates and length of hospital stays.3,4 Recent evidence from China supports this by showing a strong correlation between competition and quality outcomes including mortality rates, waiting times and patient costs.5 Despite this strong evidence, data from the United States are contradictory and indicate that competition could potentially reduce clinical outcomes.6,7

Another area of interest is whether competition affects access and equitability. There are concerns that competition could lead to providers 'cherry picking' patients who have potential to generate greater income.8 A US-based systematic review has indicated this by showing that competition can reduce access for some chronic conditions.9 There is also evidence from Colombia that competition promotes biased selection of patients.10 In addition to inequalities between different patient groups, a study comparing the United States and Canada concluded that competition can widen existing variations between locations.11 A systematic review of Russian reforms also suggests that increased competition can exasperate interregional inequalities in quality and access.12

International evidence on the impact of competitive markets on cost appears to be more positive. The majority of US evidence demonstrates that competition reduces prices.13,14 This seems to be true in other countries which have introduced managed competition into their insurance markets such as China5 and the Netherlands.15 There is also evidence from the United Kingdom that competition can improve efficiency and thus reduce the cost of certain services.4 While this indicates that there are benefits to competition, there may also be some unintended negative consequences. There is suggestion from US data that competition hinders collaboration between services and that this impacts care outcomes.7 Evidence from Sweden shows that competition can also cause fragmentation between primary and secondary care.16 Other negative impacts found in research include dissatisfaction, increased stress and resistance among professionals.17,18 There is also concern that competition can impact medical ethics and promote self-serving behaviour that is not in the patients' best interest, such as inappropriate referral to specialists. …

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