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Do mergers affect hospital outcomes? Evidence from the English secondary care sector

This study examines the effect of hospital mergers on hospital activity and performance in the English secondary care sector. Preliminary results show positive effects on hospital activity and significant improvements in performance. Policy implications suggest that hospital mergers influence the type and quality of services provided. The study acknowledges limitations in the methodology and proposes potential solutions.

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Do mergers affect hospital outcomes? Evidence from the English secondary care sector

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  1. Do mergers affect hospital outcomes? Evidence from the English secondary care sector - Preliminary results - Vanessa Cirulli*, Giorgia Marini***vanessa.cirulli@uniroma1.it**giorgia.marini@uniroma1.it • Italian Health Economics Association (AIES) • 23rd Annual Conference • Naples, 27-29 September 2018

  2. Goal To assess the effect of hospital mergers on hospital outcomes, i.e. on hospital activity and performance. In England, over the past twenty-five years, there have been marked changes in organizational structures and budgetary arrangements in the NHS causing, among other things, a widespread merger activity in the hospital sector. The number of hospital providers in England has in fact decreased by 13% between 2000 and 2008, from 195 acute and specialist Trusts in 2000 to 169 in 2008.

  3. Data • Longitudinal data, available annually for a period of 8 years from 2001 to 2008. It contains information on all acute and specialist hospitals in England • Unique identifier for each hospital • Unique dataset combines information from several data sources (mainly administrative data): • performance indicators (Healthcare commission, CQC) • hospital characteristics (Hospital Episode Statistics - HES) • Hospital Activity Statistics (HAS) • the Medical and Dental Workforce Census (Department of Health data from individual hospitals’ websites)

  4. Dependent Variables(9 measures of hospital activity)

  5. Policy Variable • merged = 1 if the hospital is the result of a merger in a given year, and it is zero otherwise (snapshot effect) • merged_forward= equals 1 in the year the new merged hospital starts its activity and subsequent years, and zero otherwise (persistent effect)

  6. Control Variables • Number of available beds • Type of hospitals (teaching vs. non-teaching) • Proportion of patients aged 0-14 and 60+ and proportion of females • Number of tests • Number of theatres • Medical and non-medical staff • Median waiting times • ALOS • HHI • FT dummy (ft=1 from year trust gains Foundation status, onwards)

  7. Empirical methodology • DID methodology • We test whether: • there are any differences in the level and in the composition of hospital activity between merged and non-merged Trusts • the merger activity has made any difference at all • there are long-standing differences in the level and in the composition of hospital activity between these different types of organisations, which have made some of them more likely to merge than others

  8. Empirical methodology • We consider 9 different measures of hospital activity • We compare these measures over time for merged Trusts and non-merged Trusts • We explore the robustness of our results by using different combinations of controls and different estimation methods (OLS and fixed effects) • Moreover, we analyze the performance rating (from level 1 = low to 4 = high) by using a multinomial logistic model, considering level 4 the baseline comparison group in which we include hospital characteristics (teaching, specialist and London) and other policy interventions (FT)

  9. Inpatient admissions, 2000-2008 Elective admissions, 2000-2008 Patients attending first outpatient appointment, 2000-2008 Emergency admissions, 2000-2008

  10. Patients first visiting A&E department, 2000-2008 Elective-emergency ratio, 2000-2008 Daycases, 2000-2008 Inpatient-outpatient ratio, 2000-2008 Daycase-elective ratio, 2000-2008

  11. Results (1)

  12. Results (2)

  13. Results (3)

  14. Preliminary conclusions • Policy effects • In the year of merger and onward, the effect on hospital activity is always positive (except for elective-emergency ratio) while the effect on hospital performance is positive and always significant • Policy implications • Preliminary results suggest merging activity in the hospital sector affect the type of service provided • Performance is positively affected by hospital mergers • Limits and possible solutions • Methodological perspective • The DID methodology assumes random assignment to the treatment group, whereas in the context of Trust mergers, assignment of Trusts to the treatment and control groups is not random. The estimation of the effect of Trust mergers may be biased by the existence of confounding factors solution: matching method • Policy perspective • Mergers in the public sector are planned by the regulator: there might be an anticipation effect possible solution: add some lags in the empirical specification • Mergers occurred in different years possible solution: wave analysis

  15. Thank you for your attention Comments are welcome!

  16. References Collins B., (2015) "Foundation trust and NHS trust mergers" The KingFund ISBN:978 1 909029 55 2 Cooper, Zack and Gibbons, Stephen and Jones, Simon and McGuire, Alistair (2010) “Does hospital competition improve efficiency? An analysis of the recent market-based reforms to the English NHS”. CEP discussion papers, No. 988. Centre for Economic Performance, London School of Economics and Political Science, London, UK. Cooper, Z., Gibbons, S., Jones, S. and McGuire, A. (2011), Does Hospital Competition Save Lives? Evidence From The English NHS Patient Choice Reforms*. The Economic Journal, 121: F228–F260. doi:10.1111/j.1468-0297.2011.02449.x Fulop N1, Protopsaltis G, King A, Allen P, Hutchings A, Normand C. (2015) "Changing organisations: a study of the context and processes of mergers of health care providers in England." Soc Sci Med.;60(1):119-30. Gaynor M., Moreno-Serra R., Propper C. (2010) "Death by Market Power: Reform, Competition and Patient Outcomes in the National Health Service" NBER Working Paper No. 16164 Gaynor M., Laudicella M., Propper C. (2012) "Can governments do it better? Merger mania and hospital outcomes in the English NHS" Journal of Health Economics 31 528– 543 Jacobs R.,Mannion R., Davies H.T.O., Harrison S., Konteh F., Walshe K. (2013) "The relationship between organizational culture and performance in acute hospitals" Social Science & Medicine 76 pp. 115-125 Kessler, D. P. and Geppert, J. J. (2005), “The Effects of Competition on Variation in the Quality and Cost of Medical Care”. Journal of Economics & Management Strategy, 14: 575–589. doi:10.1111/j.1530-9134.2005.00074.x Kessler D.P., McClellan M.B. (2000) "Is Hospital Competition Socially Wasteful?" The Quarterly Journal of Economics, Vol. 115, No. 2, pp. 577-615

  17. References Krishnan, R. A., Joshi, S. and Krishnan, H. (2004), The influence of mergers on firms' product-mix strategies. Strat. Mgmt. J., 25: 587–611. doi:10.1002/smj.410 Propper, C. (2012), Competition, incentives and the English NHS. Health Econ., 21: 33–40. doi:10.1002/hec.1804 Propper C, Damiani M, Leckie G, Dixon J. (2007) "Impact of patients' socioeconomic status on the distance travelled for hospital admission in the English National Health Service" J Health Serv Res Policy.;12(3):153-9. Propper C., Burgess S., Green K., (2004) "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market" Journal of Public Economics Volume 88, Issues 7–8, Pages 1247-1272 Schmitt M. (2017) "Do hospital mergers reduce costs?" J Health Econ. 2017 Mar;52:74-94. doi: 10.1016/j.jhealeco.2017.01.007. Epub 2017 Feb 7. Bloom N. A, Propper C., Seiler S., Van Reenen J. (2005) "The Impact of Competition on Management Quality: Evidence from Public Hospitals" The Review of Economic Studies, Vol. 82, Issue 2, Pages 457-489 Simpson J., Shin R. (1998) "Do nonprofit hospitals exercise market power? International Journal of the Economics of Business; 5, 2; ProQuest pg. 141 Ho V., Hamilton B.H. (2000) "Hospital mergers and acquisitions: does market consolidation harm patients?" Journal of Health Economics Volume 19, Issue 5, Pages 767-791

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