Information, ‘consumer search’ & choice in healthcare

1. Information, ‘consumer search’ & choice in healthcare Professor Nancy Devlin Website: www.staff.city.ac.uk/n.j.devlin/home.htm e-mail: n.j.devlin@city.ac.uk Social Market Foundation, London Seminar on Supported Choice 12th October 2004

2. 1. Choice in economics Perfect markets and perfect information Caveat emptor Consumers can determine quality ex ante (“Search”-) or ex post (“Experience”- goods) Consumer search Technical and allocative efficiency

3. 2. Choice in healthcare markets “Reputation”goods:  consumers cannot determine quality ex post (Wolinsky 1993;1995). Consumer search vs. agency Quality: multi-dimensional; complex. Knowledge about health & healthcare differs based on differences in costs and benefits of obtaining information (Arrow 1963) More choice of providers increases search costs, reducing competition? (Satterthwaite and Pauly 1979;1981)

4. 3. Information, quality and choice in the NHS (Appleby, Harrison, Devlin 2003) Choice of what? Treatment? Provider? What is the aim of increasing patient choice? Is “more choice” always good – or are there appropriate limits? Is increasing choice compatible with other NHS objectives e.g. efficiency; equity? What attributes do patients care about when making choices?

5. 4. Facilitating informed choices How will patients obtain information? How can consumer search best be supported? “…three quarters of the public say they are already confused by the amount of conflicting health advice available. The same proportion look to their GP to guide them through this ‘health maze’” (BUPA 2003) “ Information is often poor and can limit a patient’s’ ability to make choices about their care” (Markham and Smith BMJ 2003)

6. 4. Reputation and choice in the LPCP • Burge, Devlin, Appleby, Rohr & Grant (2004) • Total of 1813 patients participated in a DCE • ~50% response rate • Provided 11604 separate choice observations for analysis • Trading behaviour observed:

7. Reputation is very important. Patients on higher incomes are more concerned about going to hospitals with a worse reputation. Patients from a home hospital with a poor reputation place more value on going to hospitals with a better reputation Reputation: worse than existing - household income <£10k worse than existing - household income >=£10k unknown - household income <£10k unknown - household income >=£10k better than existing - home hospital <= poor better than existing - home hospital > poor

8. 5. Implications There are differences between sub-groups.Does equity requires that the uptake of choice is the same across all sub-groups?Or does the exercise of choice itself address equity concerns?Differences in the value attached to reputation will have an impact on demand. If information on reputation is available, those on higher incomes will migrate towards the hospitals with better reputationceteris paribus. If information on reputation is not available, all else being equal, those on lower incomes will be more likely to accept treatment at hospitals with faster treatment, ceteris paribus, as they are less averse to reputational uncertainty.